Key Takeaways
- PayPal and Moderna represent two distinct types of investment dilemmas: PayPal faces a crisis of execution and competition, whereas Moderna confronts a binary risk profile dependent on scientific discovery.
- While both stocks appear inexpensive on conventional metrics, their discounted valuations reflect significant structural challenges—slowing growth and intense competition for PayPal, and a post-pandemic revenue cliff for Moderna.
- PayPal’s recovery hinges on CEO Alex Chriss’s ability to revitalise product innovation and defend its market share against nimbler rivals, making it a bet on operational turnaround.
- Moderna’s future valuation is almost entirely tethered to the success of its non-COVID pipeline, particularly its RSV and cancer vaccine programmes, making it a high-risk, high-reward proposition suitable for venture-style public market investors.
The market has a particular distaste for fallen darlings, and few exemplify this better than PayPal and Moderna. Both have experienced substantial declines from their pandemic-era peaks, with recent performance seeing PayPal down approximately 13% and Moderna a more precipitous 34%. These figures, however, mask two fundamentally different stories of investor disillusionment. One is a tale of a fintech incumbent struggling with a crisis of confidence and competitive encroachment; the other is a biotech pioneer facing a post-vaccine reckoning. Analysing whether they represent value traps or genuine turnaround opportunities requires dissecting two very different sets of operational and strategic challenges.
PayPal: Navigating a Crisis of Confidence and Competition
PayPal’s predicament is not one of existential threat, but of stagnation. The company is grappling with a pincer movement: intensifying competition from the likes of Apple Pay, Block, and Adyen, coupled with a perceived slowdown in product innovation. While Q1 results may have met certain expectations, the broader narrative is one of decelerating growth in total payment volume (TPV) and a struggle to maintain its once-dominant position in online checkouts.1 The challenge for new CEO Alex Chriss is to prove that PayPal can be more than a utility; that it can innovate at a pace that defends and expands its territory.
Initiatives like the new ‘Fastlane’ checkout experience are designed to address this directly, aiming to reduce friction and improve conversion rates for merchants.2 Yet, the market remains sceptical. The core issue is whether these incremental improvements can shift the tide against platforms offering more integrated and seamless payment solutions.
A Valuation Conundrum
From a valuation perspective, PayPal appears inexpensive. A forward price-to-earnings (P/E) ratio in the mid-teens seems attractive when compared to the broader technology sector. However, this discount reflects the prevailing uncertainty. The stock is arguably in a ‘show me’ state, where investors require tangible evidence of a growth re-acceleration before they are willing to assign it a higher multiple. Until then, it risks being categorised as a value trap: statistically cheap but lacking the catalysts for a re-rating.
| Metric | PayPal (PYPL) | Block (SQ) | Context |
|---|---|---|---|
| Forward P/E Ratio (approx.) | ~15x | ~26x | PayPal’s valuation reflects market concerns over its lower growth profile compared to peers. |
| Q1 2024 Revenue Growth (YoY) | 9% | 19% | Demonstrates the competitive pressure from faster-growing rivals in the fintech space.3, 4 |
| Primary Challenge | Reigniting growth, product innovation | Achieving consistent profitability | Each company faces a different primary obstacle to a higher valuation. |
Moderna: Beyond the Vaccine Cliff
Moderna’s situation is less about competitive dynamics and more about a stark business model transition. The company enjoyed a meteoric rise on the success of its Spikevax COVID-19 vaccine, but the inevitable decline in pandemic-related revenue has created a significant financial cliff. For the first quarter of 2024, the company reported total revenue of $167 million, a staggering 91% decrease from the $1.9 billion reported in the same period a year prior.5
The investment case for Moderna is now almost entirely dependent on its pipeline and the underlying potential of its mRNA platform. The market is looking past the declining vaccine sales and asking what comes next. Success here is not guaranteed and carries immense binary risk. The recent approval of its RSV vaccine, mresvia, is a crucial first step in demonstrating its ability to commercialise a second major product.6
A Pipeline of Possibilities
Beyond RSV, the company’s future rests on a portfolio of candidates in various stages of development, most notably its individualised neoantigen therapy for melanoma, being developed in partnership with Merck. Positive trial data for these programmes are the only catalysts that can meaningfully alter the company’s trajectory and justify its long-term potential.
| Programme | Therapeutic Area | Stage | Significance |
|---|---|---|---|
| mresvia (mRNA-1345) | Respiratory (RSV) | Approved | First major product diversification beyond COVID-19. |
| mRNA-4157/V940 (with Merck) | Immuno-oncology | Phase 3 | Potential to validate mRNA technology in a major oncology indication. |
| mRNA-1283 | Infectious Disease (COVID-19) | Phase 3 | Next-generation vaccine, aiming for improved storage and efficacy. |
| mRNA-1010 | Infectious Disease (Influenza) | Phase 3 | Entry into the large seasonal flu market. |
Investment Implications: Patience or Prudence?
Comparing these two companies reveals two distinct risk profiles. A bet on PayPal is a bet on a management-led operational turnaround. The path to recovery lies in execution: refining the product, fighting off competitors, and leveraging its enormous user base more effectively. The risk is that management fails to execute and the company slowly cedes ground to more agile players.
An investment in Moderna, by contrast, is a venture-style bet on scientific discovery. Its fate is tied not to incremental business improvements but to the definitive outcomes of clinical trials. The risk is binary; a trial failure could lead to further significant downside, while a success could generate substantial returns.
Perhaps the most salient hypothesis is how the market may eventually resolve these situations if the current malaise persists. For PayPal, a prolonged period of undervaluation relative to its strong cash flow could attract the attention of private equity, viewing it as a prime leveraged buyout (LBO) candidate. For Moderna, its validated mRNA platform could make it a compelling acquisition target for a major pharmaceutical firm looking to acquire, rather than build, a next-generation vaccine and therapeutics engine, particularly once a second product demonstrates commercial traction.
References
1. PayPal. (2024, April 30). PayPal Reports First Quarter 2024 Results. PayPal Investor Relations. Retrieved from https://investor.pypl.com/news-and-events/news/news-details/2024/PayPal-Reports-First-Quarter-2024-Results/default.aspx
2. PYMNTS. (2024, January 25). PayPal’s New Fastlane Checkout Experience Aims for Passwordless Future. Retrieved from https://www.pymnts.com/news/payment-methods/2024/paypals-new-fastlane-checkout-experience-aims-for-passwordless-future/
3. Barchart. (2024). Why PayPal Stock Is a Screaming Buy for the Second Half of 2024. Retrieved from Barchart.com.
4. Block, Inc. (2024, May 2). Block, Inc. Reports First Quarter 2024 Results. Block Investor Relations. Retrieved from https://investors.block.xyz/news/news-details/2024/Block-Inc.-Reports-First-Quarter-2024-Results/default.aspx
5. Moderna, Inc. (2024, May 2). Moderna Reports First Quarter 2024 Financial Results and Provides Business Updates. Moderna Investor Relations. Retrieved from https://investors.modernatx.com/news/news-details/2024/Moderna-Reports-First-Quarter-2024-Financial-Results-and-Provides-Business-Updates/default.aspx
6. U.S. Food and Drug Administration. (2024, May 31). FDA Approves First Vaccine for Use in Adults Ages 60 and Older to Prevent Lower Respiratory Tract Disease Caused by Respiratory Syncytial Virus. Retrieved from https://www.fda.gov/news-events/press-announcements/fda-approves-first-vaccine-use-adults-ages-60-and-older-prevent-lower-respiratory-tract-disease
7. @nataninvesting. (2024, July 1). [On the downside, the weakest performers were: $PYPL (–13%): I’m still confident in the name and happy with the company’s Q1 results $MRNA (–34%): for which I’ve written a detailed note on my Substack]. Retrieved from https://x.com/nataninvesting/status/1932110967938163077
