PayPal (NASDAQ: PYPL )one of the world’s largest digital payments companies, was once a promising growth stock. Yet over the past five years, its stock has declined nearly 80% as competition stiffens, eBay (NASDAQ: EBAY ) As a top customer, and a challenging macro environment has stifled its growth in active accounts and revenue.
From 2021 to 2025, PayPal’s year-end active accounts only increased from 426 million to 439 million. It fell well short of its original goal (which it later abandoned) of reaching 750 million active accounts by 2025. As its account growth stagnates, it is trying to fend off pressure from its branded checkout platform, Venmo peer-to-peer payments app, debit cards, and Buy Now, Pay Later (BNPL) services.
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At the same time, it is reducing its high-volume, low-value platforms (including its backend platform Braintree) to stabilize its margins and transaction costs. It is 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 fall by mid-single digits as its branded checkout platform struggles to stand out in a sea of similar services. So while PayPal stock might look cheap at nine times this year’s earnings, it might be worth the discount. Therefore, it would be better to invest in another financial giant with a wider moat: American Express (NYSE: AXP ).
American Express is often compared visa (NYSE: V ) and MasterCard (NYSE: MA )but it operates a different business model. Visa and MasterCard do not issue their own cards — they only partner with banks, which issue cards and make loans. They generate most of their revenue by charging merchants “swipe fees” when these cards are used.
American Express is both a card issuing bank and a payment network operator. Therefore, it withdraws its cards with its balance sheet and earns interest on these accounts. It is well protected from interest rate fluctuations: if interest rates rise, net interest income rises; If interest rates go down, it earns higher card processing fees because consumer spending accelerates.
American Express serves fewer cardholders than Visa or MasterCard, but focuses on more affluent, low-risk customers that it’s steadily growing. 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 strong growth rate for a stock that trades at just 17 times this year’s earnings — and I believe it will continue to do so for PayPal and many of its financial peers for the foreseeable future.
