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WHY IS NO ONE BUYING THIS GEM? 💎
PayPal $PYPL ( ▲ 0.89% ) has been stuck in the penalty box for years. Once a market darling trading at 90x earnings, it’s now chilling at a 12x forward P/E. It’s basically the “clearance bin” of fintech.
But here’s the thing. Under the hood, PayPal’s quietly getting stronger. Margins are expanding, buybacks are booming, Venmo’s surging, and management finally stopped lighting money on fire. If you believe in buying dollars for pennies, this setup should make your eyebrows shoot up.
Let’s break it down.
The Setup: Pessimism Overdone
Back in 2021, PayPal was living the high life. 90x earnings, sky-high expectations. Then the tech bubble popped, and the market slammed the brakes. Today? PYPL trades at 12x forward earnings, a full 50% below its 5-year average.
PayPal’s been left in the dust: FINX (a fintech ETF of PayPal’s rivals) is up +64% over 3 years, while PYPL is still down -22%. The market’s treating PayPal like it’s finished but the fundamentals tell a very different story.
Meanwhile:
Operating income: $3.22B (Q3 2020) → $6.05B (Q2 2025).
Net income: $3.14B (2020) → $4.68B (Q2 2025). That’s +49%.
Free cash flow (FCF) margin: 24.9% → 31.3%.
ROIC: 8.97% (2023, when new CEO Alex Chriss took over) → 11.46% last quarter.
Basically, PayPal’s getting fitter and leaner while the market still treats it like it’s eating cold pizza on the couch.
The New Boss Effect
Alex Chriss took the reins in 2023, and he’s been cutting costs like Gordon Ramsay cutting onions. Since then:
Operating margins keep climbing (+140 bps in Q2 2025, +260 bps in Q1).
Expenses are down, income is up.
Return on total capital has snapped higher.
Add in PayPal’s investments into AI (Rasa, Bureau, Finmo—fraud prevention + treasury tools), and you’ve got a recipe for even fatter margins.
And unlike a lot of “AI hype” stories, PayPal already has the $6.6B cash pile to actually deploy on strategic bets and acquisitions.
The Venmo Growth Engine
Here’s where it gets fun. PayPal’s TPV (total payment volume) isn’t exploding like it used to. Just +5% YoY in Q2. But management doesn’t care. Instead of chasing flashy growth, they’re going for steady, margin-rich income.
Meanwhile, Venmo’s absolutely popping:
Debit card users up 40% YoY.
Monthly active users surging.
“Pay with Venmo” becoming the default for everything from Uber rides to Taco Bell tacos.
Unbranded checkouts (where PayPal powers payments behind the scenes) are also gaining steam. This is PayPal’s sneaky lane to grow without begging merchants to plaster “PayPal” logos everywhere.
Buybacks: Quietly Printing Returns
If you’re a long-term shareholder, this is where you smile.
Share count down 18.4% in 5 years.
Down 7.7% just in the first half of 2025.
Management still has $24B authorized for more buybacks ($15B approved in 2022 + another $15B in 2025).
What does it actually mean for you? Your slice of the pie keeps getting bigger, even if revenue grows slowly.
Valuation Math: Where We Land
PayPal trades like a beaten-down bank stock, but the fundamentals look way better. Let’s run the numbers:
EV/EBITDA: With $32.2B TTM revenue and margins trending back toward record highs (~21–22%), PayPal’s EBITDA could hit $7B in the next year.
Current EV: ~$66.5B → EV/EBITDA ~9.5.
Sector average: 11.3.
If the market simply re-rates PayPal to the sector average, that’s a 23% bump in share price. That’s how we get to the $79–$85 target by 2026 year-end.
Compare that with peers:
Payoneer, PaySafe, Block—they all have worse margins but higher multiples.
PayPal’s the cash cow of the bunch, yet trades at the bargain bin.
Risks: What Could Go Wrong?
TPV stalls: If people stop using PayPal or Venmo, all bets are off.
Unbranded checkout fizzles: If merchants stick with Stripe or Adyen, PayPal loses its sneaky growth lever.
Debt pressure: Total debt = $12.1B. But with $10B+ in cash and net debt/EBITDA at just 0.35x, it’s manageable… unless cash flow dries up.
The Big Picture
PayPal today is not the bubble stock of 2021. It’s leaner, more disciplined, and buying back stock like crazy. Venmo’s scaling, AI investments are underway, and management’s finally acting like adults.
At 12x forward earnings, PYPL is literally cheaper than banks like JPMorgan and Goldman Sachs… despite growing faster. If that doesn’t scream “value play,” I don’t know what does.
Bottom line: the market’s still stuck in 2021 hangover mode, while PayPal 2025 is already sobered up and hitting the gym.
TL;DR
PayPal trades at 12x forward P/E (50% below 5-year average).
Operating income doubled since 2020; net income +49%.
Margins + buybacks are the real story: FCF margin now 31.3%, ROIC up to 11.5%.
Venmo growth (debit card +40% YoY) + unbranded checkout = stealth growth drivers.
Buybacks have cut share count by 18% in 5 years, with $24B still authorized.
Valuation math points to $79–$85/share by 2026 (23% upside).
Risks: slowing TPV, failed unbranded push, or cash burn increasing leverage.
Current PYPL = undervalued fintech beast hiding in plain sight.
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