PayPal Stock Has a Fundamental Case That Goes Beyond Bitcoin

After a year that we felt would never end, it’s hard to believe that we’re in the second month of 2021. For companies like PayPal (NASDAQ:PYPL), it’s been a roller-coaster start to the year. After a few ups and downs, PayPal stock is up 7% since the beginning of the year.

PayPal (PYPL) logo overlays daylight photo of corporate building
Source: JHVEPhoto /

I’ve been bullish on PayPal for quite some time. The company is managing to become widely accepted without losing its cool factor. Allowing users to sell cryptocurrency is part of that. But it’s only the latest way that PayPal is showing its customers that they have more options.

Perfect For Gig Workers

PayPal is an ideal resource for those in the gig economy. In 2018, the Gig Economy Index reported that one-third of U.S. workers relied on gig work for at least a portion of their income.  At that time, the majority of these workers were making a lifestyle choice.

Today, there are many individuals that are embracing the gig economy out of necessity. And for some of those workers, gig work now makes up the vast majority, if not the entirety, of their income. Whether that will be a permanent trend remains to be seen. However if it does, it’s a bullish indicator for PayPal stock. This is particularly true as the payment processing space is getting crowded with competitors such as Square (NYSE:SQ) and Amazon (NASDAQ:AMZN).

In 2018, the website disclosed research that showed 51% of gig workers preferred to be paid via PayPal as opposed to other forms of payment including direct deposit. The reason being that it’s easy to use and there is widespread access. In 2018, there were approximately 250 million users. That number is currently around 361 million.

And businesses can also get access to additional funds through PayPal’s Working Capital program. This allows borrowers to take out short-term loans without a credit check. The approval is based solely on an algorithm that analyzes business revenue (and therefore the likelihood of repayment).

Banking Reimagined

About a year ago, I wrote the following about PayPal:

There are some individuals who stay away from traditional banks out of concern for privacy and/or security. But many of the unbanked are not that way by choice. Circumstances have typically put them in a precarious place financially…Whether by design or by happy accident, PayPal saw an opportunity. The unbanked not only did not have access to the digital economy. They were at risk of falling behind even further.

That was before the pandemic. Today, the digital divide is growing greater and so is the distrust that consumers have towards traditional institutions. PayPal gives these gig workers tools like a debit card to ensure that they don’t have to transfer funds to use their account for everyday purchases making the need for traditional banking less and less.

Is PayPal Stock Part of the Bitcoin Trade?

In the last week of January, PayPal stock dropped 7%. Is it a coincidence that the price of Bitcoin (CCC:BTC) has tumbled around the same time? Maybe that’s the case. However, PayPal stock got a jolt earlier in the month when it announced that it was going to start allowing users to trade Bitcoin, Ethereum (CCC:ETH) and Litecoin (CCC:LTC) through the PayPal app.

So, it’s not too far of a leap to suggest that investors may have taken some profit when they reminded (again) of the volatility that exists in the crypto market.

Still, PayPal’s move to embrace cryptocurrency is another sign of how the company is taking a “both and” approach that is in opposition to traditional banking. And I believe that’s where the real value lies in PayPal stock.

The simple fact is that PayPal provides services that go well beyond peer-to-peer payments. InvestorPlace colleague Thomas Neil may have been right to suggest that investors take some profits, as they appeared to do. Profit taking is usually not a bad strategy.

But now PayPal stock is rallying. And the Bitcoin story is only one part of it, and maybe not the most important.

On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.

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