PayPal’s Growth May Fade, but Its Future Is Still Bright

When it comes to online spending growth, PayPal Holdings may no longer be able to just hold out a bucket in a historic downpour. But that doesn’t mean its potential is drying up.

PayPal shares were lower Tuesday despite a strong third-quarter earnings result. The driver appears to be a potential crest of its explosive volume growth. While the third quarter saw PayPal’s year-over-year total payment volume rise 36% on a currency-neutral basis, even faster than its already huge 30% increase in the second quarter, the company also indicated that the growth rate may slow, at least for now.

For one, the company says that a travel-spending bump it saw over the summer doesn’t appear to have been sustained into the fourth quarter. And next year, the company will face a tough comparison with the surge in volume it experienced as consumers and merchants shifted from in-store cash and card swipes to online spending and touchless payments.

None of these challenges should come as shocks. Perhaps investors are using this report as an opportunity to take profits on a stock that is up some 70% this year. They may also be eyeing the company’s more rapidly falling “take rate,” or the percentage of volume that becomes revenue.

But they shouldn’t jump off the PayPal bandwagon. For years, PayPal has been growing wherever it can be used for payments. The big questions were whether merchants would still promote it, even as other digital payment methods sprouted up, and whether it would ever find a way to make inroads with in-store payments.

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