PayPal 2026 Outlook: Is PYPL Undervalued?

In today’s market, largely fueled by AI-driven enthusiasm, many company valuations appear disconnected from underlying cash flows and are instead propped up by lottery-ticket expectations. I believe there are still genuine undervalued opportunities out there: companies with solid financials, disciplined management teams focused on execution, and credible paths to future growth. One such company that I believe fits this profile is PayPal (NASDAQ: PYPL).

Over the past couple of years, PayPal has slowly begun refocusing on its core strengths—payments and its massive user base—while also expanding into new products aimed at reigniting growth. This article provides a comprehensive analysis of PayPal by examining key bullish indicators, bearish considerations (including risks and challenges), and an assessment of valuation.

This analysis does not attempt to cover every possible consideration. I’ve intentionally omitted certain topics (such as Venmo’s continued growth) to stay focused, current, and avoid repeating themes already well covered in other published analyses.

“The four most dangerous words in investing are: ‘This time it’s different.’”
— Sir John Templeton

Introduction

PayPal Holdings, Inc. (NASDAQ: PYPL) is a global leader in digital payments, operating a multichannel network that connects more than 400 million consumers with roughly 35 million merchants worldwide. Over the past five years, PayPal has lived through a classic COVID-era boom followed by a sharp correction. The stock reached an all-time high of approximately $308 in July 2021, driven by pandemic-fueled online spending, and has since fallen roughly 80% as growth slowed and competition intensified.

Today, PYPL shares are right below $60, trading at a forward P/E of roughly 10.18 according to Finviz.com. Several challenges have weighed on investor confidence, including the loss of eBay’s business (which finalized its transition to Adyen in 2023) and the continued rise of well-funded competitors such as Apple Pay, Google Pay, Block’s Cash App, and Affirm. By 2023, active user growth had stalled; PayPal’s active accounts actually declined by about 2% following several years of double-digit growth while revenue growth backtracked into the single digits.

Amid this turbulence, longtime CEO Dan Schulman stepped down in 2023, and Alex Chriss, formerly of Intuit, took over as CEO. Shortly after stepping into the role, Chriss identified the company’s core issues and began rolling out a focused turnaround strategy.

Exhibit: 1 – PYPL Yahoo Finance

Bull Indicators

1. New Leadership Driving Focus and Efficiency

What immediately stood out to me about the new management team put in place in 2023 was their emphasis on transparency and long-term discipline. One of the first moves under CEO Alex Chriss was an overhaul of PayPal’s reporting metrics. Management eliminated inflated user-growth targets and purged millions of inactive accounts, choosing instead to focus on economically valuable users. They also redefined key performance indicators to prioritize transactions per account, margin dollars, and free cash flow per share, while tightening non-GAAP adjustments to better reflect underlying performance.

While these changes likely created a short-term drag on the stock, they signaled a meaningful shift toward credibility and sustainable growth. In an environment where pressure to meet quarterly expectations often incentivizes short-term thinking, truly transparent, long-term-oriented leadership has become increasingly rare. When a management team is willing to take actions that may hurt the stock in the short run and even potentially their own compensation in order to position the business for durable, long-term value creation, it stands out.

Leadership like this in today’s public markets is comparable to a lunar eclipse: it doesn’t happen often, but when it does, it’s worth paying attention.

When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact. – Warren Buffett

In addition to strengthening transparency, the new management team also set clear strategic initiatives. Under Alex Chriss’s leadership, PayPal refocused on its core branded checkout products and implemented targeted cost cuts, yielding immediate results. By the third quarter of 2024, PayPal’s GAAP operating margin had improved to 17.7%, a 198 basis-point increase from the prior year. This momentum continued, with margins expanding another 33 basis points to 18.1% in Q3 2025.

The financial results below are sourced directly from PayPal’s Q3 2024 and Q3 2025 quarterly reports and help illustrate the progress made since the management transition in 2023.

Exhibit 2 – PayPal Q3 2024 Report Page 2

Exhibit 3 – PayPal Q3 2025 Report Page 2

Exhibit 4 – PayPal Two-Year Growth Analysis

As seen in Exhibits 2–4 above, PayPal’s management appears to have turned the tide and is beginning to recognize the financial benefits of these changes.

2. Expanding Payment Ecosystem (Online, In-Store, and Global)

PayPal is aggressively expanding the scope of its payments platform. In mid-2025, the company rolled out its first in-store mobile wallet in Germany, allowing PayPal users to tap-to-pay in physical locations and even use PayPal’s BNPL installments (“Ratenzahlung To Go”) at checkout. Germany served as a pilot market, but due to rapid adoption—over five million signups, according to management’s Q3 2025 presentation—this functionality is expected to expand to other European countries as early as the first half of 2026.

PayPal is also pursuing global interoperability through a new platform called PayPal World, announced in 2025. PayPal World is designed as a “global wallet interoperability” network that connects PayPal and Venmo with major international digital wallets, including Latin America’s Mercado Pago, China’s Tenpay/WeChat Pay, and India’s UPI. If successful, this platform could make cross-border transactions seamless for hundreds of millions of users, dramatically expanding PayPal’s addressable market. If adoption takes hold, I believe the opportunity set for a platform like this could be enormous.

Exhibit 5 – PayPal Third Quarter 2025 Presentation: Growth Factors

3. New Revenue Streams – Advertising & Data Monetization

One of the more exciting bullish developments, in my view, is PayPal’s entry into digital advertising. Historically, PayPal has generated the bulk of its revenue from transaction fees, but since late 2024 the company has been quietly building a high-margin advertising business. In May 2024, PayPal hired a former Amazon/Uber advertising executive to lead this new division and began selling ad placements to its merchant clients. By Q3 2025, PayPal Ads had expanded beyond the U.S. into the U.K. and Germany.

PayPal is leveraging what I would describe as a true treasure trove of consumer purchasing data, spanning roughly 400 million users and 30 million merchants globally. Advertisers can even embed a “Buy with PayPal” button directly into ads, allowing for instant checkout. Major brands such as Mercedes-Benz, Uber, DoorDash, and Walmart signed on as early clients. While PayPal has not yet disclosed specific ad revenue figures, management has indicated the opportunity is significant; Amazon’s and Uber’s advertising divisions both scaled into billion-dollar businesses.

Importantly, PayPal’s transaction data scale exceeds that of most retail platforms, which only adds (no pun intended) to its appeal for advertisers. This is also a high-margin business, as delivering targeted ads carries minimal incremental cost beyond PayPal’s sales efforts to acquire advertisers. When PayPal Ads Manager, the company’s dedicated advertising platform, fully rolls out in 2026, it could meaningfully boost top-line growth while further diversifying revenue streams.

In July 2025, JPMorgan Chase notified fintech companies including PayPal, of plans to begin charging for access to bank account data. While this represents a potential cost headwind (discussed later), it also highlights the underlying value of financial data itself. PayPal’s ability to monetize its data through personalized offers, advertising, and credit underwriting could have a material impact on future revenue growth.

4. Stablecoin and Crypto Ambitions

PayPal has continued to diversify its offerings by embracing cryptocurrency and blockchain technology. In 2023, PayPal became the first major U.S. fintech to launch its own USD-backed stablecoin (PYUSD). After a slow start, adoption accelerated sharply in late 2025, driven largely by strategic incentives. As of December 2025, PYUSD in circulation had surged to roughly $3.8 billion (up 224% in three months, making it the world’s sixth-largest stablecoin.

PayPal actively fueled this growth by partnering with crypto firms such as Sentora and subsidizing yields for users who hold or lend PYUSD. Given the pace of adoption over the past three months, I don’t think it’s far-fetched to expect continued growth within the broader $200+ billion stablecoin market—especially as some U.S. regulators project that market could reach $3 trillion by 2030.

In my view, one of management’s smartest tactical moves around PYUSD was its partnership with Coinbase. This agreement allows for allows zero-fee conversion between PYUSD and USD on Coinbase’s platform. To put that into context, the only other stablecoin Coinbase offers zero-fee USD conversion for is USDC, which was co-founded by Coinbase and Circle.

A common question is how PayPal actually makes money from PYUSD; and whether this model is scalable. In my opinion, the answer is yes. PayPal earns interest on the cash reserves backing PYUSD, which are invested primarily in Treasuries. As PYUSD is used for payments, PayPal can also reduce card-network costs (Visa, Mastercard, etc.) and earn settlement and merchant fees, even if user conversions remain zero-fee. In short, PayPal profits from the float and the payment rails, not from charging users excessive transaction fees.

If the bullish thesis plays out and blockchain becomes more mainstream over the next decade, PayPal’s early adoption and regulatory-compliant approach via its partnership with Paxos could give the company a meaningful advantage over competitors.

5. Strong Position in Buy Now, Pay Later (BNPL) Space:

PayPal has quickly become a leader in the fast-growing BNPL space, leveraging its massive user base and extensive merchant network. PayPal’s “Pay in 4” product launched just a few years ago, in August 2020, yet its installment offerings now dominate the U.S. market. Today, roughly 56% of U.S. BNPL users have used PayPal’s BNPL service.

In 2025, PayPal’s BNPL total payment volume is on track to reach approximately $40 billion, rivaling Affirm’s volume of roughly $35.7 billion. BNPL volume for PayPal grew 20% year over year in Q3 2025, underscoring the strength and continued momentum of this segment.

Exhibit 6 – PayPal Third Quarter 2025 Presentation: BNPL

The seamless PayPal Pay Later button allows for far easier integration compared to most competitors, many of which still require merchants to sign up individually. BNPL is a merchant-funded offering, which merchants pay higher fees in exchange for increased engagement and higher checkout conversion. PayPal’s “Pay in 4” charges consumers 0% interest and is repaid in four equal installments, typically over a six-week period.

Because these loans are short term, PayPal’s BNPL product carries lower risk. The program is funded off PayPal’s balance sheet, but loss rates have remained manageable, allowing the company to scale the business without taking on excessive credit risk. This stands in contrast to many competitors that offer longer-term BNPL financing and, in turn, assume materially higher risk.

From both a macro and microeconomic perspective, the growth in BNPL is hard to ignore. PayPal’s management appears to be taking a customer-focused approach, offering frictionless checkout, charging 0% interest to consumers while still remaining conservative in its lending practices. There are several avenues to expand profitability over time, such as longer financing terms or interest-bearing options. While those opportunities exist, I appreciate management’s disciplined approach. And at the end of the day, it’s hard to complain about BNPL total payment volume growing more than 20% year over year.

6. AI Partnerships and Integrations

The final bullish catalyst, in my view, is PayPal’s growing set of partnerships in the AI space, which are creating entirely new use cases for payments. In late 2025, PayPal announced a landmark partnership with OpenAI’s ChatGPT, becoming the first digital wallet integrated directly into the platform. Through OpenAI’s new “Agentic Commerce” protocol, ChatGPT’s massive user base, more than 800 million+ weekly users as of November 2025, can now discover products and complete purchases using PayPal without ever leaving the chat interface.

PayPal took a similar step earlier in 2025 through a partnership with Perplexity AI, enabling in-chat shopping within that platform as well. Perplexity users can search for products and check out using PayPal directly inside the AI application.

Taken together, these integrations position PayPal as the payments layer for the rapidly emerging AI-driven commerce ecosystem, allowing the company to capture transaction fees from entirely new platforms. The significance of these partnerships goes beyond near-term growth. From a self-preservation and risk-mitigation standpoint, embedding PayPal into how consumers may shop in the future helps ensure the company remains relevant as behavior shifts. Given the pace at which AI tools are evolving, these types of integrations could very well become the norm rather than the exception.

Bear Considerations

Despite the many growth initiatives underway, PayPal still faces a number of challenges and risks that support the bear case. These include intensifying competition, slowing growth metrics, margin pressure, and ongoing regulatory and strategic uncertainty.

1. Intensifying Competition

PayPal operates in a highly competitive payments landscape, and increasing competition over the past several years has continued to pressure the company’s outlook and growth profile. That pressure is coming from multiple directions. Large technology companies such as Apple and Google have significantly expanded their payments offerings and branded checkout capabilities. At the same time, companies like Block (Square) have aggressively pursued both merchants and peer-to-peer users through platforms such as Cash App. Even the fast-growing BNPL segment faces heavy competition from established players like Affirm and Klarna.

As competition has intensified, pressure on PayPal’s take rate has followed. In fiscal year 2024, PayPal’s average take rate declined to 1.72%, representing an average annual decrease of approximately 5.3% over the past five years. Much of this compression has been driven by growth in unbranded processing through PayPal’s Braintree unit. While Braintree processes a large volume of card payments for merchants, it operates in a materially lower-margin segment, weighing on overall profitability.

2. Growth Slowdown and Market Saturation

As with most maturing companies, the days of consistent 20%+ annual revenue growth that characterized PayPal throughout much of the 2010s are likely in the rearview mirror. Not surprisingly, this shift has raised concerns among investors about PayPal’s long-term growth trajectory. Following the pandemic-era surge in 2020 and 2021, when revenue grew 20.7% & 18.3% respectively, growth has since decelerated to 8.19% in 2023 and 6.7% in 2024.

For comparison in 2025, PayPal’s Q3 2025 transaction revenues were up 6.4% year over year. That said, according to management’s Q3 2025 investor presentation, full-year 2025 non-GAAP EPS growth is still expected to come in between 15% and 16%. For some investors, the concern lies not only in the single-digit revenue growth, but also in the possibility that PayPal may be approaching saturation in certain key markets.

3. Pressure on Margins and Take Rate

While PayPal remains profitable, its margins are under pressure from multiple fronts. As discussed earlier, PayPal’s take rate (revenue as a percentage of TPV) has steadily declined, falling to 1.72% in 2024 vs. 2%+ a few years ago. This reflects a strategic shift toward larger merchants that pay lower fees, increased growth in lower-margin business lines such as Braintree, and higher-volume, fee-free peer-to-peer transfers through platforms like Venmo.

Many bears also point to the stark margin comparison between PayPal and the card networks. Visa and Mastercard consistently post operating margins north of 50%, while PayPal’s GAAP operating margin stood at roughly 18% as of Q3 2025. The argument is that PayPal operates a more resource-intensive model, which structurally limits margin expansion relative to the networks.

4. Regulatory and External Risks

The payments and fintech sectors are highly regulated, and any shifts on this front could create meaningful headwinds for PayPal. One recent example is the JPMorgan data-access issue. In mid-2025, large banks such as JPMorgan Chase announced plans to begin charging fees to fintechs for access to bank account connections and data. Platforms like PayPal and Venmo rely on aggregators such as Plaid to link users’ bank accounts for funding and transfers. This introduces additional operating costs for PayPal and could also detract from the consumer experience over time.

More broadly, global regulators continue to scrutinize both fintech and crypto-related activities. PayPal’s stablecoin, PYUSD, operates within an evolving regulatory framework, and any unfavorable regulation or a broader loss of confidence in stablecoins could quickly slow adoption and growth.

Additional regulatory and external considerations include:

• EU and U.K., authorities are pushing open-banking rules and caps on fees
• Increased regulatory scrutiny of Buy Now, Pay Later products due to consumer credit risks
• Execution risks as PayPal expands into new markets

5. Stock Sentiment and Historical Baggage

PayPal’s stock sentiment has remained largely bearish since a series of disappointments that began with overestimated user growth in 2021. The company then abruptly reset its outlook in early 2022, which undermined investor credibility and trust. By 2023, amid peak investor frustration, an executive management shakeup followed.

Since then, it often feels like investors are looking for reasons to stay negative. For example, despite beating Q2 2025 earnings estimates and raising guidance, PayPal’s stock fell roughly 4%, likely driven by declining transaction counts. While I believe the stock is already undervalued, sentiment remains fragile. If PayPal fails to clearly demonstrate a path to margin reacceleration or suffers a major misstep such as a failed product launch or the loss of a key partnership, investor confidence could deteriorate further.

In summary, PayPal faces several strategic and structural challenges, including intense competition across its business lines, decelerating revenue and margin growth, and potential regulatory and external risks. If not managed effectively, these factors could weigh on PayPal’s earnings growth and valuation in the years ahead.

Valuation

From a valuation standpoint, both relative to its own history and compared to peers, PayPal’s stock appears meaningfully undervalued. As of this writing, PYPL shares trade below $60, down roughly 31% in 2025 and more than 80% from the July 2021 high of $308. While much has clearly changed and the days of consistent double-digit revenue growth may be behind the company, PayPal remains an undervalued cash-generating business. The company continues to aggressively repurchase shares and recently announced its first-ever quarterly dividend of $0.14 per share, which was paid on December 10, 2025.

During PayPal’s Q3 2025 earnings release, management raised non-GAAP EPS guidance from $5.15–$5.30 to $5.35–$5.39, representing 15–16% year-over-year growth.

Exhibit 7 – PayPal Third Quarter 2025 Presentation: EPS

Below, I outline several of the valuation comparisons and calculations I’ve run to arrive at a price target.

Peer Comparison

At its current price, PayPal’s valuation metrics are compelling on the surface. According to Finviz.com, PYPL trades at a forward P/E of approximately 10.18x and a trailing P/E of 11.89x. For comparison, Block (Square) which is also down significantly in 2025 (roughly 26%), trades at a similar trailing P/E of about 13.3x, but its forward P/E stands at 20.6x. While the business models differ, Visa and Mastercard trade at materially higher forward P/E ratios of roughly 25x and 30x, respectively.

Exhibit 8 – PayPal Peer Comparison

That said, I personally place limited weight on peer valuation comparisons beyond using them as a rough check on whether a company is trading at a relative premium or discount. Ultimately, peer multiples do not drive my buying decisions. If I run the numbers and determine a company is undervalued with a comfortable margin of safety, relative comparisons become secondary. There are simply too many opportunities in the market for me to assume I can reliably forecast what premium or discount an entire group of stocks will trade at five years from now. What matters most to me is how quickly the business can return my capital through cash flows.

FCF Intrinsic Value

To keep the free cash flow intrinsic valuation straightforward, I outline the inputs and calculation below. This is a customized valuation framework that I use alongside several others to form a more holistic view of intrinsic value. Markets tend to oscillate between cash-flow denial during speculative periods and excessive pessimism during downturns. This blended approach forces discipline on both ends—rewarding real cash generation while still respecting balance sheet strength—and helps identify situations where price and business reality diverge.

FCF Intrinsic Value Calculation: (Growth Multiple × Free Cash Flow (6-Year Average) + Total Shareholders’ Equity × 0.8) ÷ Diluted Shares Outstanding

Exhibit 8 – PayPal Intrinsic Value Calculation

DCF Valuations:

For the discounted cash flow valuations (both FCF-based and EPS-based), I use the following inputs:

• EV/EBITDA average exit multiple: 10x (currently ~7.8x; 3-year average ~10.3x)
• FCF per share (3-year average): $5.19
• EPS per share (3-year average): $4.18
• FCF growth rate (10 years): 6.36%
• EPS growth rate (10 years): 12%
• Discount rate (WACC): 10%

Using these assumptions:

• Discounted FCF valuation: $80.45
• Discounted FCF margin of safety: 25.45%
• Discounted EPS valuation: $96.27
• Discounted EPS margin of safety: 37.71%

Valuation Summary

I’ve run several additional valuation frameworks beyond those shown above, but the examples here are intended to give a sense of the range of outcomes and the discipline behind the analysis. Many of the assumptions are intentionally conservative, particularly the use of three-year averages for both FCF and EPS. I prefer to err on the side of caution; if the investment still looks attractive under conservative assumptions, I’m far more comfortable with the risk.

It’s also worth noting that growth assumptions may prove understated. PayPal is currently repurchasing approximately $1.5 billion of stock per quarter, or about $6 billion annually. With a market capitalization near $57 billion, that equates to roughly 2.6% of shares retired each quarter, or more than 10.5% annually. Ignoring stock-based compensation and other dilution, even if net income were to remain flat, buybacks alone could drive EPS growth of roughly 10%+ per year.

In summary, valuation is one of the most compelling aspects of the PayPal story today. The stock offers a rare combination of value and embedded growth potential: a low earnings multiple, strong free cash flow generation, a solid balance sheet, and multiple catalysts ahead. Based on the analysis above, I arrive at a price target of $96. At a current price of roughly $60, this implies upside of approximately 60% and a margin of safety near 38%, well above my minimum threshold of 25%.

Summary

PayPal finds itself at an inflection point. Over the past five years, the company has evolved from riding an e-commerce boom to navigating a far more mature and competitive landscape. Its stock has gone from market darling to relative underperformer, weighed down by negative investor sentiment even as the underlying platform continues to evolve and expand revenue opportunities.

The bull case rests on new leadership and a clearer strategy focused on unlocking value through a more product-driven approach, strategic partnerships, and new monetization avenues such as advertising and crypto. These initiatives have the potential to reaccelerate growth, improve margins, and reduce financial risk by diversifying revenue streams. Over time, this could support a steady increase in valuation over the next five to ten years. PayPal’s moat which is anchored by its entrenched user base, brand trust, and a vast trove of transaction data, appears to be gradually reasserting itself as the formidable asset it truly is.

Conversely, the bear case highlights intensifying competition across nearly all business lines, which has steadily chipped away at PayPal’s perceived moat. Revenue growth has meaningfully slowed from the consistent 20%+ levels of the past, and margin pressure remains a concern.

At the same time, it’s clear PayPal is no longer the only game in town. Competition from Big Tech and agile fintechs continues to pressure take rates and costs. The coming years will test whether PayPal can reinvent itself once again in order to keep pace with shifting consumer behavior and rapid technological change. Execution will be critical, particularly in scaling the advertising business, managing credit risk in BNPL, and establishing PayPal as the preferred wallet in emerging platforms such as ChatGPT.

For investors, PayPal offers an interesting mix of durable cash flow and upside optionality that may not be fully reflected in current forecasts. The core business continues to generate billions in earnings and free cash flow, providing a solid foundation for the current valuation. At the same time, newer growth initiatives offer meaningful upside if they gain traction. The stock’s low multiples suggest a margin of safety if earnings remain resilient, while also acknowledging that a return to sustained 20%+ revenue growth is unlikely.

Both retail and institutional investors are watching closely for confirmation that the turnaround is taking hold; whether through accelerating branded checkout volumes, stabilizing take rates and margins, new revenue streams, or sustained double-digit EPS growth. Based on recent earnings reports and management commentary, I believe we may already be seeing the early stages of that turnaround.

In conclusion, with the stock trading at historically low valuations and multiple credible growth catalysts in play, PayPal appears positioned such that the upside potential outweighs the downside risks. The company is innovating, expanding, and executing against a well-defined plan. If even one of these major catalysts materializes, assuming all else remains stable, PayPal’s valuation should, at a minimum, move closer to industry averages. In my view, the company has too many positive levers to be trading at its current discounted multiples. For these reasons, I rate PYPL stock a BUY.

Disclosure

This article is for informational purposes only and does not constitute financial, investment, or any other form of professional advice. The views expressed are those of the contributor and are based on publicly available information and personal analysis.

The contributor holds positions in some or all of the investments mentioned, including PayPal (PYPL), and may benefit from any price appreciation discussed herein. This potential conflict of interest is disclosed for transparency.

No representation is made as to the accuracy or completeness of the information provided. Readers are solely responsible for verifying any facts and should consult a licensed financial advisor before making investment decisions. Past performance is not indicative of future results.