PayPal stock analysis: will the Honey scam allegations bite?

PayPal stock had a strong performance in 2024 as the fintech giant attempted its comeback. It rose by over 38%, easily beating the Nasdaq 100 and S&P 500 indices. So, will the PYPL shares continue rising as it faces competition and as its Honey product is accused of being a scam?

PayPal’s Honey accused of running a scam

The PayPal stock price has pulled back in the past few days, mirroring the performance of most companies in Wall Street. One reason for this pullback is that PayPal has been accused and is being sued for running a scam in the form of Honey.

Honey, a company that PayPal pad $4.4 billion to acquire, has come into the spotlight after being accused of being a scam. The crisis started when MegaLag, a YouTube creator, made a video showing that the company was scamming users and creators.

The summary is that the company changes the affiliate link given to creators and collecting the commissions. At the same time, the company steals from shoppers by not showing the right coupons, and taking a bigger commission. 

As a result, Honey and PayPal have been sued by one creator called Wendover Productions and many others may do the same.

It is unclear how this crisis will affect Honey in the long term. In the near term, however, there are signs that the Chrome Extension is costing it customers as the number of users has dropped by over 3 million. 

Another unclear thing is the impact of this crisis to PayPal since the company does not disclose Honey’s numbers. What is clear, however, is that Honey is a fairly big deal for PayPal because of its huge profit potential. All Honey spends is the extension management and marketing. 

Competition is a big issue

PayPal’s other big headache is that competition in its core business is growing. Its wallet business is seeing substantial competition from Google, Amazon, and Apple. 

Also, its crypto business is being disrupted by firms like Robinhood Markets and Scrill. Stripe, a leading player in the payments industry, has made inroads in the crypto industry by acquiring Bridge, a firm in the stablecoin industry.

Additionally, PayPal’s Buy Now Pay Later (BNPL) solution has struggled to gain market share in an industry dominated by Klarna, Affirm, and AfterPay. PayPal’s BNPL business is similar to that of other firms in that it lets users pay interest free in four transactions or pay monthly while paying interest.

Venmo has been disrupted by CashApp, one of the most active payment solution in the United States.

This competition explains why PayPal is no longer growing as it did in the past. The most recent results showed that PayPal’s total payment volume rose by just 9% in Q3 to $422 billion, while its total revenue rose by 6% to $7.8 billion.

The number of monthly active accounts rose by 2%, while active total active accounts rose by just 1%. 

Therefore, PayPal’s recovery in 2025 will depend on whether it will continue delivering strong results in the next few quarters. 

PayPal stock price analysis amid Honey scam

The weekly chart shows that the PYPL share price has crawled back in the past few weeks. It rose and crossed the important resistance level at $70.35, its highest swing on April 29. The stock has moved above the 50-week moving average, and is nearing the 23.6% Fibonacci Retracement level. 

PayPal has also formed a small inverse head and shoulders pattern. Therefore, the stock will likely continue rising as bulls target the next key resistance point at $110, the 23.6% retracement point, which is almost 30% above the current level.