PayPal: Glimmer of Hope in the Growth Segment Despite Past Turbulence

In recent years, there has been a mixed sentiment among investors towards growth stocks, despite the ongoing bull market. Ongoing concerns about the economic situation and its impact on companies across various sectors remain present, while many hoped for a decline in interest rates and inflation. Companies with strong fundamentals emerged from the pandemic with varying degrees of success. Long-term investments in high-quality firms can strengthen the portfolio in any market environment. Those looking to invest $500 now should consider two outstanding growth stocks. PayPal's shares showed a slight decline following the latest quarterly report, but they are trading approximately 30% higher than at the beginning of 2024. However, they are still far from their all-time highs, being about a third of their value from 2021. PayPal went through some rough years after the pandemic-driven highs, followed by challenging quarters. Comparable phases of unusual growth and stagnant user numbers prompted some investors to sell the stock. PayPal was not the only company to experience unusual growth rates during the pandemic, only to undergo inevitable normalization thereafter. Changed consumer behavior and rising inflation had a negative impact on e-commerce, directly affecting PayPal's payment volume. Many companies go through cyclical growth phases, and additionally, PayPal is a much more mature company today. Nonetheless, the company has shown continuous improvements in recent quarters, which boosted the stock in 2024. A look at the third-quarter results reveals some remarkable highs. Net revenue increased by 6% compared to the previous year to $7.8 billion, while operating income under generally accepted accounting principles (GAAP) rose by 19% to $1.4 billion. Although the number of active accounts grew by only 1%, total payment volume increased by 9%. The number of payment transactions per active PayPal account also increased by 9% on a rolling 12-month basis. The company was profitable in the quarter, recording a net profit of $1.1 billion, representing a slight 1% year-over-year decline. Furthermore, it generated an operating cash flow of $1.6 billion.