Life in the Fast Lane for PayPal? New Partnerships Could Boost the Stock.

It looks like better times are ahead for PayPal $PayPal (PYPL.US)$ after a rough patch for the past few years.

The payments company has been hurt by increased competition from Apple; Google's owner Alphabet and Block, the parent of Square and the Cash App. All of them offer mobile payment services that compete with PayPal's popular Venmo.

The rise of Stripe, a private company valued at $70 billion, has put a dent into PayPal's growth too. There are also concerns about competition from Paze, the online checkout/digital wallet service owned by Early Warning Services, a consortium of seven major banks, including JPMorgan Chase, PNC, and Truist, that also own Zelle, a Venmo rival.

PayPal's stock has tumbled nearly 80% from the peak levels it hit in the summer of 2021. But analysts are hopeful that CEO Alex Chriss, who joined PayPal in September 2023 after a nearly two-decade stint working for financial software firm Intuit, can send PayPal roaring ahead.

PayPal is banking on Fastlane, a guest checkout service, to boost growth. It allows customers to access their payment and address information with their email, without entering a password.

PayPal launched Fastlane earlier this year and it recently signed deals with European fintech Adyen and U.S. payments giant Fiserv to allow merchants on their networks to use Fastlane. PayPal also just unveiled an expanded partnership with Canadian based e-commerce powerhouse Shopify that makes PayPal an online credit and debit-card processor for Shopify Payments in the U.S.

Investors are loving the partnership push. PayPal's stock is up more than 15% in the past six months, outperforming both the S&P 500 and Nasdaq during that period. Block, by way of comparison, is down more than 20%.

Analysts are growing more bullish about PayPal's chances for a comeback as well.

J.P. Morgan's Tien-tsin Huang wrote that the Shopify partnership shows PayPal "is willing to own less than a majority share of checkout in exchange for more durable economics," adding that "this as an example of familiar co-opetition." Think of the famous line from The Godfather: Part II about keeping your friends close and your enemies closer.

UBS analyst Timothy Chiodo said in a report that PayPal should get a bump in gross payment volume from the Shopify deal.

And analysts at Bank of America seem to think that Fastlane will help PayPal. They noted in a report in late August that conducting transactions with Fastlane was "more seamless than with Paze." (BofA, interestingly enough, is another one of the big banks that are part of the Paze/Zelle consortium.)

And despite the big move in PayPal's stock as of late, shares are still cheap. Investors continue to worry about the competitive threat from rivals, which also include "buy now pay later" fintech leader Affirm and, to some extent, the traditional payments companies Visa and Mastercard. PayPal trades for less than 15 times the per-share earnings it is expected to product in 2025, a steep discount to its historical average forward P/E of 26.

So it looks like PayPal investors may be able to enjoy the fast lane to more stock gains.