Key Points
PayPal (NASDAQ: PYPL), one of the world’s largest digital payment companies, was once a promising growth stock. Yet over the past five years, its stock has declined nearly 80% as intense competition, the loss of eBay (NASDAQ: EBAY) as a top customer, and a challenging macro environment throttled its growth in active accounts and revenues.
From 2021 to 2025, PayPal’s year-end active accounts only grew from 426 million to 439 million. That was well below its original goal (which it later abandoned) of hitting 750 million active accounts by 2025. As its account growth stalls out, it’s trying to drive more transactions through its branded checkout platform, Venmo peer-to-peer payments app, debit cards, and buy now, pay later (BNPL) services to offset that pressure.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
Image source: PayPal.
At the same time, it’s downsizing its higher-volume, lower-value platforms (including its backend platform Braintree) to stabilize its margins and transaction take rates. It’s also cutting costs and aggressively repurchasing its shares to boost its EPS as its top-line growth cools.
But for 2026, it still expects EPS to decline by mid-single digits as its branded checkout platform struggles to stand out in a sea of similar services. So while PayPal’s stock might seem cheap at nine times this year’s earnings, it might deserve that discount valuation. Therefore, it might be smarter to invest in another financial giant with a wider moat: American Express (NYSE: AXP).
Why is American Express a better buy?
American Express is often compared to Visa (NYSE: V) and Mastercard (NYSE: MA), but it operates a different business model. Visa and Mastercard don’t issue their own cards — they only partner with banks, which issue the cards and take on the debt. They generate most of their revenues by charging merchants “swipe fees” whenever those cards are used.
American Express is both a card-issuing bank and a payment network operator. Therefore, it backs its own cards with its own balance sheet and earns interest on those accounts. It’s well insulated from interest rate swings: if interest rates rise, its net interest income rises; if interest rates decline, it earns higher card processing fees as consumer spending accelerates.
American Express serves fewer cardholders than Visa or Mastercard, but its focus on more affluent, lower-risk customers enables it to grow steadily. From 2025 to 2028, analysts expect its EPS to grow at a 15% CAGR as its “closed-loop” system locks in more customers. That’s a robust growth rate for a stock that trades at just 17 times this year’s earnings — and I believe it will continue to outperform PayPal and many of its financial peers for the foreseeable future.
Should you buy stock in PayPal right now?
Before you buy stock in PayPal, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and PayPal wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $534,008!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,090,073!*
Now, it’s worth noting Stock Advisor’s total average return is 949% — a market-crushing outperformance compared to 192% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of March 7, 2026.
American Express is an advertising partner of Motley Fool Money. Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Mastercard, PayPal, Visa, and eBay. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short March 2026 $65 calls on PayPal. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
