I Don’t Like PayPal, But I Might Invest in PayPal

PayPal is one of those companies that I have a bias against.

I don’t remember precisely when my dislike for PayPal started. If you go back ~20 years, I bet I was using PayPal in the very early days. It was basically the main way people could buy things on eBay. I used to buy a lot of things on eBay, so PayPal was right there. So far, so good.

My main issue with PayPal has to do with their fees. Needless to say, I bet I’ve paid PayPal over $100,000 in fees over the years. PayPal has certainly earned its money from me.

As soon as I could figure out how to stop using PayPal and switch to the traditional banking network, I was relieved. That saved me so much money.

As a result, I have this negative bias against using PayPal as a business client. The fees are endless, ridiculous, and are constantly increasing. Every few months, they increase some fee for something.

Visa and Mastercard are increasing their fees for the first time in a decade, and the world is going mad. PayPal increases its fees three times per year.

So, I say this as a “vendor / customer” of PayPal. I don’t like them very much.

But as a “buyer / customer”, they’re awfully convenient. I use PayPal to buy stuff simply because it’s easier than hunting for my wallet to find my credit card. I guess buyers don’t see the fees. And apparently, they’re good at dispute resolution. If you don’t get the product or can’t get the service you were promised, you can go back through them and get your money back. So that’s good. Like Visa in that way.

As an investor, I should consider PayPal.

Despite my best wishes, no company has really broken through the “online shopping” space to disrupt PayPal. When you buy a product, you often only have two choices – Stripe (credit card) and PayPal.

Stripe really is just a credit card processor as a consumer. You enter your numbers and info, and they charge your card. Stripe doesn’t (to my knowledge) provide any services to the consumer.

But PayPal has a website that I can log into. I can send money to anyone with an email address. Can I use Stripe to send another person money?

Also, PayPal owns Venmo. I’ve never used Venmo, but I hear some people really like it for peer-to-peer money transfers.

$PYPL currently trades around $62. Some people consider that to be a cheap price. The company doesn’t pay a dividend but consistently increases its revenues (fees!), profits, and cash-flows.

I’ve initiated a small starting position in PYPL. I did this one a bit differently.

I bought a long-dated vertical CALL spread – JUN 2025 62.50/72.50

So for JUNE 2025 (almost two years from now), if PayPal is trading above $66, I will make a profit, and if it’s trading above $72, I will make the maximum profit.

It roughly cost me $4 to buy this spread (per contract), and if PayPal is trading above $72.50 in 2 years, I will make a $6 profit.

(Remember, one contract is 100 shares, so each value is “x 100”. So it cost me $400 to buy one contract, and I will make $600 if it reaches the upper strike. And I purchased more than one contract to make it interesting.)

That would be a 150% profit on PYPL if the stock price increased 17% in the next two years.

It’s a gamble, sure. But it’s a small gamble for me. Roughly 0.04% of my portfolio. Not 4%, 0.04%.