The story of PayPal’s (PYPL) stock performance over the past few years has been a rollercoaster ride.

After surging at the start of the pandemic on expectations of benefiting from higher online payments, the stock has since pulled back nearly 80% from its highs.

However, a deeper look tells the tale of a company facing short-term challenges while possessing compelling long-term potential.

When Covid-19 struck in early 2020, PayPal was in the right place at the right time.

As lockdowns sent consumers online, the company processed billions more monthly payments.

Its stock price more than doubled, hovering around $300 per share.

Investors had visions of unchecked growth as digital payments became even more ingrained in daily life.

But reality set in as reopening economies caused spending patterns to normalize.

PayPal also faced headwinds including rising competition and expanding into new business lines.

One such initiative was buy now pay later (BNPL) financing for customers.

Though helpful for merchants during the spending boom, BNPL loans soured in the current economic slowdown.

In 2023, PayPal wrote off many of these debts as borrowers struggled with inflation and rising interest rates. The losses hurt profits and added risk to the balance sheet.

PayPal’s stock began to falter, and the declines accelerated.

Another sore point was the addition of fewer new accounts, a key metric for growth companies. Some investors saw this as a failure to attract new customers.