Should You Forget PayPal (PYPL) and Buy American Express (AXP) Instead?

Core Insights - PayPal has experienced a significant decline in stock value, dropping nearly 80% over the past five years due to intense competition, loss of eBay as a major customer, and a challenging macroeconomic environment [1] - The growth in PayPal's active accounts has stagnated, with only an increase from 426 million to 439 million from 2021 to 2025, falling short of its abandoned goal of 750 million [2] - To counteract growth pressures, PayPal is focusing on increasing transactions through its branded checkout platform, Venmo, debit cards, and buy now, pay later services while downsizing lower-value platforms [2][4] - Despite cost-cutting measures and share repurchases to boost earnings per share (EPS), PayPal anticipates a mid-single-digit decline in EPS for 2026 due to challenges in differentiating its services [4][5] Comparison with American Express - American Express operates a distinct business model compared to Visa and Mastercard, as it issues its own cards and earns interest on accounts, providing insulation from interest rate fluctuations [6][7] - Analysts project a 15% compound annual growth rate (CAGR) for American Express's EPS from 2025 to 2028, driven by its focus on affluent customers and a "closed-loop" system [9] - American Express trades at a valuation of 17 times this year's earnings, which is considered attractive given its robust growth prospects compared to PayPal and other financial peers [9]