Has PayPal Stock Peaked?

Onstream

Vincent Clock, Motley Fool Contributing Investment Analyst (CMFMrClock)

The PayPal share (WKN: A14R7U) has, so the hope of many investors, hopefully crossed the valley during the correction. We don't want to look at the price performance, but at the operational performance.

It is well known that PayPal is one of the leading payment service providers. More than 430 million active users process more than $1.2 trillion in payments each year. This is truly a strong ecosystem that can have some value charm at a cheap valuation.

However, an analyst has now dealt with the shares of the US payment service provider and speaks of a special situation. While other players are growing, PayPal can't, at least in the short term. Has the zenith been passed?

PayPal Stock: Notable Observations!

It's the November data that shows a difference, according to a Deutsche Bank analyst (reported by Benzinga). PayPal failed to grow as a result, posting an 8% year-over-year decline in U.S. adoption. Whereas Apple Pay demonstrated 52% year-over-year growth. There is of course a clear difference.

A first explanation is served directly. PayPal is just more mature. Around the world, the payment service provider has a 16% share of e-commerce volume, while Apple Pay accounts for just under 5%. Of course, we could just say the economy is slowing, consumer sentiment is down. The fact that the payment volume fell slightly in November is therefore not a broken leg or the end of the world.

Nevertheless, the question arises as to whether PayPal has reached a low. Precisely because the market share is already so high. And because figures show the 430 million active users and 1.25 trillion US dollars in transaction volume, a high level of processing. Possibly. But there could still be economic growth. Or: prospect of improvement sooner or later.

Even if: play out more mature advantages!

In any case, behind the PayPal share is a more established payment service provider, which is having difficulties in this market phase, at least in the USA. In the rest of the world this can of course be different. We have to check that accordingly in the coming quarterly figures.

If that's the case, other growth drivers would have to be there. Possibly also playing off trust in one's own ecosystem. PayPal's take rate has recently been around 2%. If management can succeed in enforcing small increases here, it can mean a lot of sales and also profit. In this respect, levers for scaling would certainly still be available.

Nevertheless, foolish investors should pay attention to such data. Of course, November and especially this November are not all-saying indicators. But other operational insights also make it clear that the business model may already be at a more mature stage.

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