PayPal Holdings Inc.

The stable outlook reflects S&P Global Ratings' view that PayPal Holdings Inc.'s strong performance positions it well to compete in the highly competitive payments space. It also reflects our expectation that the company will further expand its merchant loan book (of at least $500 million a year) and spend in share repurchases, acquisitions, and incremental funding needs for the growing corporate loan book moderately more cash than it will generate over the next two years. We could lower the ratings if operating performance is weaker than we expect or if rapid growth or weak underwriting quality in the merchant loan book leads to substantial incremental risks. We could also lower the ratings if leverage unexpectedly surges (with S&P Global Ratings

...PayPal operates one of the largest online payments systems and digital payments platforms globally. PayPal benefits from strong growth prospects in online and digital payments. Customers worldwide are moving away from cash and checks, increasing demand for online and digital payments provided by PayPal. Despite an increasingly aggressive financial policy, PayPal operates with low leverage. The company issued $5 billion unsecured notes issuance in September 2019, but PayPal's pro forma leverage (as measured by debt to EBITDA) was at a very low 0.1x at the end of June 2019, thanks to a very strong cash position. PayPal operates with below average profitability versus financial market infrastructure (FMI) peers (a 27% EBITDA margin in 2018). The fastest-growing segment (peer-to-peer payment platform Venmo) still operates at a loss. PayPal may exhibit more volatility in earnings than peers in the coming quarters, owing to its large strategic investment portfolio. Changes in fair value are reflected...

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