PayPal Holdings Inc.

The positive outlook reflects S&P Global Ratings' view that PayPal's business franchise shows consistent strength. Our base-case scenario factors in our view that the company may post incremental loan loss provisions in its loan book in response to deteriorating economic conditions, but that losses will be contained. We expect leverage will rise slightly, but remain below 1.0x over the next 18-24 months. We could revise the outlook back to stable if leverage rises faster than we expect, for example because of a very large acquisition, if business strength is not sustained, or if, contrary to our expectations, loan losses are not contained (following a worsening of economic conditions). We could raise the ratings if PayPal sustains its business strength, while

...PayPal Holdings Inc. operates one of the largest online payments systems and digital payments platforms globally. It facilitates online payments in more than 100 different currencies, in more than 200 markets worldwide. 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 has issued $9 billion of unsecured debt since September 2019, but PayPal's pro forma leverage (as measured by debt to EBITDA) was at a very low 0.4x at the end of March 2020, thanks to a very strong cash position. PayPal operates with below average profitability versus financial market infrastructure (FMI) peers (a 27.3% EBITDA margin in 2019). The fastest-growing segment (the peer-to-peer payment platform Venmo) still operates at a loss. PayPal may exhibit more volatility...

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