What Happened?
Shares of digital payments platform PayPal (NASDAQ: PYPL) jumped 5.6% in the afternoon session after the stock's positive momentum continued as the company announced a landmark $7 billion buy-now-pay-later (BNPL) partnership with alternative asset manager Blue Owl Capital.
The multi-year agreement allows Blue Owl to purchase receivables from PayPal's U.S. "Pay in 4" product. This strategic move enables PayPal to expand its BNPL portfolio without the associated capital constraints or credit risk, aligning with its goal of a "balance-sheet-light" model. While Blue Owl takes on the receivables, PayPal will remain responsible for all customer-facing activities, including underwriting and servicing. Investor enthusiasm for the deal reflects the significant growth in the BNPL sector, which recently saw a 21% year-over-year increase in processed volume.
After the initial pop the shares cooled down to $68.82, up 2.3% from previous close.
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What Is The Market Telling Us
PayPal’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was about 1 month ago when the stock gained 3.7% on the news that the major indices rebounded, as Fed Chair Jerome Powell delivered dovish remarks at the much-awaited Jackson Hole symposium.
Powell suggested that with inflation risks moderating and unemployment remaining low, the Federal Reserve might consider a shift in its monetary policy stance, including potential interest rate cuts. This outlook eased market concerns about prolonged high interest rates and their impact on economic growth. The prospect of lower borrowing costs bolstered investor confidence, particularly in sectors that have lagged, leading to a broad rally across the market.
PayPal is down 20.2% since the beginning of the year, and at $68.82 per share, it is trading 25% below its 52-week high of $91.81 from January 2025. Investors who bought $1,000 worth of PayPal’s shares 5 years ago would now be looking at an investment worth $353.78.
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