Prediction: PayPal Will Soar Over the Next 5 Years. Here's 1 Reason Why.

The Motley FoolJan 16, 2025 11:46 AM

After several years of breathtaking growth, PayPal Holdings (NASDAQ: PYPL) stagnated as the COVID-19 pandemic came to an end. The user base stopped growing, and there wasn't much of a cohesive strategy when it came to earnings or revenue growth over time.

In late 2023, PayPal gave its leadership team a complete overhaul. Not only did former Intuit (NASDAQ: INTU) executive Alex Chriss take over the CEO role, but also virtually every member of PayPal's C-suite and executive leadership team is new.

The early results under the new leaders have been impressive. Thanks to a focus on efficiency, adjusted EPS grew by 22% year over year in the most recent quarter. Plus, the company has launched its Fastlane checkout, formed several key partnerships, and rolled out its PayPal Everywhere campaign to boost debit card volume. And all of these are yet to be reflected in the numbers.

PayPal's ad platform is not to be overlooked

One of the most exciting developments is that PayPal announced that it would create an advertising platform. That move makes sense: PayPal has valuable spending data on over 400 million people from PayPal and Venmo that could allow it to target ads more effectively than its competitors can.

The company announced that development of the platform will be led by Mark Grether, who formerly led Uber's (NYSE: UBER) ad business, which he grew into a $1 billion revenue stream.

PayPal Ads formally launched in October, so we haven't seen any actual numbers yet. But other companies that have massive amounts of consumer data have seen success, and none has anywhere close to the spending data PayPal can leverage. For example, Amazon's (NASDAQ: AMZN) ad business, which Grether also helped build, brought in $14.3 billion in the third quarter of 2024 alone.

I'm not saying PayPal will have an Amazon-sized ad platform. Not anytime soon, at least. But it would be a mistake to overlook this part of the new leadership team's strategy.

Reviewed byTony

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