PayPal hums on the surface

But underneath are rapidly declining transaction counts

Paypal announced a strong quarter, CEO touting its renewed growth and starting its first dividend. It’s also pretty cheap, closing at $59.81 yesterday with trailing twelve month earnings of $5.03, a PE of 12x for a business that grew revenues 7% and operating earnings 9% in Q3.

But reading its quarterly something jumps out. Transactions per account declined 6% from last year, a very high rate. The cause seems to be competition from other, cheaper payment options, including the super low cost ones like Pix in Brazil and FedNow in US, which is growing transactions volume extremely rapidly.

Neither their quarterly report or earnings call seem to address the transaction count declines, instead they are focused on how its growing its loan products, balances and future speculative products like its Agentic commerce services to enable AI agents to do transactions. So the future value of Paypal appears to be more as a bank, not a transaction network. Since roughly 90% of their revenues is currently transaction based, that’s signaling that the current valuation may not be cheap at all.

As always, let me know if you think I’m missing something.