Should You Forget PayPal and Buy Visa Instead?

PayPal (PYPL 0.16%), which owns one of the world's largest digital payment platforms, was once considered a high-growth fintech stock. Yet over the past five years, PayPal's stock plummeted more than 80% as it struggled to grow its user base, revenue, and profits.

**Visa **(V 0.41%), which owns the world's largest card payments network, was widely considered a blue chip stalwart rather than a growth stock. But over the past five years, its stock has rallied nearly 50% as it generated predictable growth and expanded its ecosystem. So should investors simply forget about PayPal and buy Visa's stock instead?

Image source: Getty Images.

Why did PayPal's stock plunge?

From 2021 to 2025, PayPal's year-end active accounts only grew from 426 million to 439 million. It originally aimed to reach 750 million active accounts by the end of 2025.

As PayPal squeezed more value from its existing users, its revenue still grew at a 7% CAGR from 2021 to 2025. But its transaction take rates -- or the percentage of each transaction it retains as revenue -- continued to decline as it faced tougher competition. Its decoupling from eBay (EBAY +0.46%), which replaced PayPal with Adyen (ADYEY +1.10%) as its preferred payment provider, also throttled its user and sales growth from 2018 to 2023.

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NASDAQ: PYPL

PayPal

Today's Change

(-0.16%) $-0.07

Current Price

$44.23

Key Data Points

Market Cap

$39B

Day's Range

$44.22 - $44.71

52wk Range

$38.46 - $79.50

Volume

112.3K

Avg Vol

18.3M

Gross Margin

41.43%

Dividend Yield

0.63%

As the growth of PayPal's namesake platform cooled, the company relied more heavily on its Venmo, its peer-to-peer payments app, and Braintree, its unbranded payments platform, to drive its top-line growth. However, both of those high-growth platforms operated at lower take rates and margins than PayPal's namesake platform.

PayPal recently decided to spin off Venmo as a stand-alone business (which could free it up for a potential sale), but that divestment would further throttle its near-term growth. On the bright side, it's still forging deeper partnerships with credit card companies, launching new products and services for brick-and-mortar stores, and expanding its ecosystem with more crypto trading tools, high-yield savings accounts, and stablecoin-driven cross-border transfers. It's also bundling its payments, financial services, and risk management tools into its unified "PayPal Open" platform to lock in customers and cross-sell more services.

From 2025 to 2028, analysts expect PayPal's revenue and EPS to grow at CAGRs of 4% and 5%, respectively. Its stock seems cheap at nine times this year's earnings, and it pays a decent forward dividend yield of 1.3% (with a low payout ratio of 5%). Still, it probably won't command a higher valuation until it meaningfully grows its users and take rates again.

Why did Visa generate bigger gains?

Visa doesn't issue any of its own cards. It generates most of its revenue by charging merchants "swipe fees" (1%-3%) on their transactions whenever consumers use its branded cards. The banks that issue those Visa-branded cards are responsible for managing the actual accounts.

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NYSE: V

Visa

Today's Change

(-0.41%) $-1.36

Current Price

$329.76

Key Data Points

Market Cap

$624B

Day's Range

$329.24 - $333.35

52wk Range

$293.89 - $375.51

Volume

71.5K

Avg Vol

7.4M

Gross Margin

78.28%

Dividend Yield

0.79%

That asset-light business model enables Visa to generate steady growth, maintain high margins, and expand rapidly into new markets. To squeeze more revenue from its partner banks and merchants, it's rolling out more value-added cybersecurity, fraud prevention, data analytics, and tokenization services. It's also been launching new AI agents that assist consumers in making streamlined purchases and using stablecoins to accelerate its payments.

From fiscal 2021 to fiscal 2025 (which ended last September), Visa's revenue and EPS grew at CAGRs of 14% and 16%, respectively. The company has a wide moat, but it isn't completely immune to inflation, which throttles consumer spending, or government regulators, who are pressing it to reduce its swipe fees. Nevertheless, analysts still expect its revenue and EPS to grow at CAGRs of 11% and 18%, respectively, from fiscal 2025 to fiscal 2028.

Visa's stock still looks reasonably valued at 26 times this year's earnings, and it recently launched a new $20 billion buyback program (equivalent to 3% of its market cap) after posting its strong revenue growth since 2022 in the second quarter of fiscal 2026. Visa's forward dividend yield of 0.8% might not impress any serious income investors, but its low payout ratio of 22% gives it plenty of room for future hikes.

Should you stick with Visa instead of PayPal?

PayPal might look tempting as a deep value play, but it faces too many existential challenges to be considered a worthwhile investment. Visa faces some challenges from regulators and merchant groups, but it's growing faster than PayPal and has more irons in the fire. Therefore, I believe Visa will continue to outperform PayPal for the foreseeable future.