With PayPal (NASDAQ:PYPL) stock down more than 60% year-to-date, compared to a 30% decline in the Nasdaq-100 index, bullish investors are calling for capital to flow in. But at the same time, growth is slowing.

Meanwhile, the company continues to make a push toward becoming a bigger cryptocurrency player. That transition is either encouraging or not, depending on where you sit.

Confused yet? Well, so too is the market. But I’d assert that PayPal should head lower because the broader headwinds appear too strong currently. 

Making Crypto Inroads 

PayPal has been making a broad, concerted push toward establishing itself as a name of note in the cryptocurrency space since late 2020. 

In October 2020 the company added buy, sell, and hold functionality for crypto users on its network. At the time, that was a strong signal for the future of fintechs as it related to the future of crypto. 

A few months later, in March of 2021, PayPal launched a crypto payment feature, Checkout with Crypto. That allowed users to pay for goods and services at millions of online businesses using cryptocurrency. 

The move only strengthened the case for crypto at large and further cemented PayPal’s intentions in the space. At that time, PayPal management still hadn’t responded to customers’ greatest demand: crypto transfer functionality from their PayPal accounts to other wallets and exchanges. 

That changed earlier this month. 

But investors have to ask themselves about the broader market context before falling in line with the bullish sentiment. 

Timing Couldn’t be Worse

In a lot of ways, the timing couldn’t be worse for PayPal. Crypto is getting crushed right now. Not only does the market have legitimate concerns about the overall viability of crypto following high-profile meltdowns, but a broader risk-off is likely to continue. 

The Federal Reserve’s 75-basis-point hike means tech will continue to suffer. Crypto won’t be nearly as attractive as it was. And fintech stocks won’t command investor capital like they did prior. 

So, while the new functionality is welcomed, the timing negates the overall benefit. 

Cash Flow No-Go

PayPal’s investor update put it bluntly: “Free Cash Flow (FCF) of $1.05 billion in Q1-22, decreasing 32%, driven by lower cash earnings and unfavorable changes in working capital relative to Q1-21.”

The point here is this: The less free cash flow there is, the lower a company’s ability to self-fund growth opportunities becomes. And, in case you hadn’t noticed it, cash flows seem to be in vogue again, as tech investor Loup Venture’s Doug Clinton recently highlighted.

If you’re keeping count, that means that PayPal is getting hit from both sides. The market is broadly shedding tech stocks and fintech because the cost of capital is rising and it is now rewarding fundamentals, not growth. PayPal can count less on outside funding. And it can’t fund growth from the inside since free cash flow is decreasing. 

Takeaway

PayPal remains a good company, but the timing of things isn’t conspiring in its favor. That’s why I’d stay away despite it being cheap now. 

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.