Why Did PayPal Stock Fall So Much?
You’ve probably clicked that blue ‘Pay with PayPal’ button a hundred times. It’s simple and it works, which for years made its stock a market superstar. So why did the company’s stock fall over 75% from its peak? The answer reveals the big difference between a great product and a great stock.
Think of the pandemic years as a massive sugar rush for online payments. With lockdowns forcing everyone to shop from their couch, PayPal saw an unprecedented surge in business. This wasn’t just normal growth; it was a once-in-a-generation event that sent its performance—and its stock price—to dizzying heights.
But every sugar rush is followed by a crash. As the world reopened, repeating that explosive growth was impossible. Imagine a local bakery that lands a huge, one-time catering order for a city festival. The next year, sales are still healthy, but they look terrible in comparison. This is what happened to PayPal; a return to normal looked like user growth stagnation to worried investors.
This wasn’t just a PayPal story, but part of wider fintech stock market trends as the digital boom cooled. Combined with the negative impact of inflation on fintech stocks, which made investors nervous about future growth, the stage was set for a dramatic fall from grace.
Who Is Eating PayPal’s Lunch? A Guide to the New Payment Wars
For a long time, PayPal was like the only convenient coffee shop on a very busy street. If you wanted a quick and reliable way to pay online, you went there. But that street is now crowded with new competition, each chipping away at PayPal’s dominance from a different angle. This new reality has fundamentally changed PayPal’s position in the market.
The challengers arrived from all sides. First, there are the tech giants like Apple and Google, who built their own payment buttons directly into our phones, offering unbeatable convenience. Then you have the “invisible” players like Stripe and Adyen, which provide the behind-the-scenes plumbing for a business’s website. Finally, companies like Block (the owner of Square and Cash App) have captured a younger audience for sending money between friends.
This brings us to the single biggest threat: the rise of the “unbranded” checkout. PayPal’s power has always been in its blue button—a familiar, branded choice you actively click. But competitors like Stripe allow a customer to simply enter their credit card details directly on a store’s site without ever seeing the Stripe logo. For the shopper, it’s a smooth experience. For PayPal, it’s a huge problem because its brand, its main asset, is completely left out of the picture.
With so many slick, and often cheaper, alternatives available, merchants are no longer automatically adding the PayPal button to their checkout page. PayPal has gone from being the default choice to just one option among many. Nowhere was this painful new reality clearer than when the company lost its oldest and most significant partner: eBay.
How Losing Its Oldest Partner, eBay, Signaled a New Reality
For most of its life, PayPal was attached at the hip to eBay. The two companies grew up together, with PayPal providing the easy, trusted payment button for eBay’s massive online auction house. It was a perfect match that helped both become household names. So when eBay announced in 2020 that it was dropping PayPal as its primary payment processor for a newer competitor, it was more than just a business decision; it was the end of an era that had defined online commerce.
The immediate effect of the eBay partnership ending was a massive financial blow. Think of it like a popular restaurant losing its biggest and most reliable catering client overnight. For PayPal, this meant that billions of dollars in transactions that used to reliably flow through its system simply vanished. This was a direct hit to the company’s bottom line and one of the clearest reasons for PayPal’s stock decline, as a huge, guaranteed source of income was erased from the books.
Beyond the balance sheet, however, the split sent a powerful message to investors. If PayPal’s oldest and most integrated partner decided to switch, it signaled that others could—and would—do the same. This one event made the threat of competition feel terrifyingly real, cracking the armor of a company once seen as untouchable. This loss of confidence was a major factor in the stock’s fall, proving that even a highly profitable company can run into trouble when its story of unstoppable growth begins to falter.
Why a Profitable Company Can Still Have a Falling Stock
This raises a confusing question for many: if PayPal is still a huge, profitable company handling billions of dollars, why did its stock fall so hard? The answer lies in the difference between a company’s current health and Wall Street’s expectations for its future. For many tech stocks, investors aren’t just buying the company as it is today; they’re buying a piece of what they believe it will become tomorrow.
Think of it like betting on a promising young athlete. You’re not paying for their current stats alone; you’re paying a premium based on the belief that they will become a superstar. In 2021, investors were paying a superstar price for PayPal, convinced it would completely dominate the future of digital payments. This is a common element in fintech stock market trends, where the story of future growth is often more powerful than today’s profits.
For PayPal, the problem wasn’t that it stopped growing; it was that the speed of its growth slowed down. After the eBay split and with new competition, the company’s own predictions for the future became less ambitious. Imagine a star student who always gets 99% on tests suddenly predicting they’ll get 90% next year. It’s still a great grade, but the change in trajectory spooks those who were betting on perfection. This gets to the heart of what is wrong with PayPal’s business from an investor’s perspective: the story of unstoppable growth had changed.
Ultimately, the stock price had to adjust to this new reality. The “superstar premium” that was baked into the price evaporated as the forecast for PayPal’s future became more modest and uncertain. The company didn’t collapse, but the sky-high bet that investors had placed on it did. This leaves a critical question: how does a company like PayPal try to win back that confidence and rebuild for a new chapter?
What’s the Turnaround Plan? A Glimpse into PayPal’s Future
Faced with this new reality, PayPal brought in a new CEO, Alex Chriss, in late 2023 with a clear mandate: fix the story. The core of the Alex Chriss PayPal turnaround plan is a shift away from the old strategy of “growth at all costs.” Instead of just adding as many users as possible, the company is now focused on what it calls “profitable growth.” This means concentrating on the users who are most active and generate the most revenue, rather than chasing millions of casual users who might sign up but rarely transact.
This new focus translates into a few key priorities. The company is working to:
- Make the core checkout experience faster and simpler to reduce friction.
- Reward and better serve their most active and profitable customers.
- Grow their “behind-the-scenes” payment services (like Braintree), where they power transactions for large merchants even if you don’t see the PayPal logo.
Ultimately, the question of whether PYPL stock will ever recover hinges on whether this new, more focused strategy can convince investors that PayPal still has a bright future. The plan signals a more mature, disciplined company, but it also acknowledges that the days of explosive, easy growth are over. This forces everyone to ask a fundamental question: is PayPal a broken company, or just a misunderstood stock?
So, Is PayPal a Broken Company or a Misunderstood Stock?
The story of PayPal’s stock isn’t a simple plunge, but a tangle of distinct threads. Understanding them reveals a bigger picture beyond the initial confusion of a massive drop in value. The dramatic fall wasn’t caused by a single failure, but by a perfect storm of factors.
The post-pandemic slowdown in online shopping met a surge in new competition, all while PayPal was navigating its pivotal split from eBay. Crucially, this reality collided with the sky-high expectations investors had previously priced into the stock, forcing a painful correction.
This reveals the most important lesson: a solid company and a soaring stock are not the same thing. So the next time you see a headline about a major stock’s collapse, you’ll have the tools to look past the number. You can ask the real questions about expectations versus reality—and understand the deeper story that most people miss.
