PayPal's Focus on Profitable Growth Should Bear Fruit

PayPal’s development of a network of both merchants and consumers early in the evolution of e-commerce allowed the company to build and maintain an enviable competitive position. Historically, PayPal’s growth had been driven by the ongoing shift toward electronic payments and the rise of e-commerce, which the coronavirus pandemic temporarily accelerated. However, the company ran into headwinds as the positives from the pandemic reversed and new competition arose. Management has attempted to combat the pressure on top-line growth with a greater focus on cost control and product innovation, with the ultimate goal of shifting toward more profitable growth. We see this evolution as the right move, but it will likely take some time to fully see the results.