With Mobile Payments Gaining Momentum, Can PayPal Still Take a Leading Position?

In July, CVS Health’s pharmacy chain became the first national retailer to integrate PayPal and Venmo QR code technology at checkout across 8,200 CVS Pharmacy stores.

More deals have followed, including with Nike and Bed Bath & Beyond. There could be more announcements coming, as PayPal remains in talks with more than 100 large retailers.

The launch of its QR code solution does more than expand PayPal’s addressable market to offline payments. For example, when people use two or more of PayPal’s products, including checkout solutions and peer-to-peer payments, it drives down customer churn by 50%. In other words, QR codes are another way to make PayPal’s brand more ubiquitous, easier to use, and a stickier experience for customers.

PayPal’s move into offline retail will be a “multiyear journey,” as CEO Dan Schulman explained during the third-quarter conference call. But he also acknowledged that management is already seeing “strong early adoption” of its QR code technology, which is a great sign for the company's long-term growth prospects.

Investors Are High on PayPal’s Prospects

This growth stock has seen its valuation stretch to a high forward P/E of 57 recently. That could limit further gains in the very near term, but PayPal can grow into that valuation over the long term. Management believes the business is now on a trajectory to grow faster than the original medium-term outlook of 17% to 18% annual currency-neutral revenue growth. 

It might be tempting for investors who bought shares earlier this year to sell and lock in quick gains, but given the enormous opportunities PayPal still has in a wide-open market, this is a stock worth holding for the long haul.