Paypal (PYPL  ) shares declined 8% following its Q2 earnings report as the company missed in terms of revenue and gave some cautious commentary on its conference call. Overall, Paypal's stock has been an outperformer this year and over the past year as its business saw a sharp increase in growth and usage during the pandemic. Now, like many tech stocks with similar experiences, it's experiencing some deceleration as business normalizes.

Inside the Numbers

In Q2, Paypal reported $1.15 in earnings per share which slightly topped analysts' expectations of $1.12 per share which was an 8% improvement from last year's Q2. Revenue fell short of expectations at $6.24 billion vs expectations of $6.27 billion. This was 17% higher than 2020's Q2.

Management attributed the weaker-than-expected report to eBay (EBAY  ) transitioning away from Paypal and opening itself up to multiple payment options. Paypal was originally created to solve eBay's payment problem and was one of the major factors in its success as it led to increasing trust between users. Eventually, eBay bought Paypal, and it was eventually spun out as its own independent company. Ironically, Paypal is now worth many multiples of eBay.

Despite this drag from eBay, user growth remained impressive as the company added 11.4 million new accounts for a total of 403 million active accounts. However, user growth is certainly slowing especially relative to upstarts like Square (SQ  ), Stripe, and offerings from more traditional banks.

Total payment volume increased by 40% to $311 billion. Last year, Paypal introduced the option to buy and sell cryptocurrencies which resulted in a major growth surge. Now, Venmo is benefitting as it added the option to buy and sell cryptocurrencies for its users in April. Overall, it resulted in payment volumes growing by 58% to $58 billion.

With these initiatives, Paypal has become one of the largest cryptocurrency intermediaries or brokerages. Many analysts expect the company to launch new features for users and merchants who want to wade deeper into the crypto ecosystem.

In terms of Q3, Paypal anticipates earnings per share of $1.07 on revenue $6.15 billion and $6.25 billion which was slightly below expectations.

Stock Price Outlook

Last year, travel stocks rallied even though they had atrocious earnings as investors correctly understood that it had little bearing on the company's future prospects. Today, the market is punishing many companies for failing to meet expectations despite facing tough comps as the pandemic led to a one-time surge in growth.

While this is likely to lead to some underperformance in the near term, it could be setting up fantastic buying opportunities in a handful of stocks. Paypal is likely to be one given that the company has a massive moat, user base, and has only started the process of increasing the monetization of its users.

Therefore, investors should use weakness as a buying opportunity.