PayPal Shares Labeled Cheap Amid Stiff Competition
PayPal (PYPL) shares currently exhibit a low trading price, evidenced by a Value Score of B. When considering the forward 12-month P/E ratio, PYPL trades at 11.86X, markedly lower than the Zacks Financial Transaction Services industry average of 22.34X. This positions PayPal as more affordable compared to competitors such as Visa (V), Mastercard (MA), and Apple (AAPL).
Presently, shares of Visa, Mastercard, and Apple are trading at P/E ratios of 27.39X, 31.51X, and 26.46X, respectively.
PYPL’s P/E Ratio (F12M)
Image Source: Zacks Investment Research
Despite its valuation appeal, PayPal shares have suffered a 25.7% decline year-to-date. This downturn is largely a result of escalating competition in the fintech industry from major players like Visa, Mastercard, Apple Pay, and Adyen. Additionally, a challenging macroeconomic climate, compounded by U.S. President Donald Trump’s tariffs on trade partners, particularly China, Canada, and Mexico, contributes to ongoing pressure on the stock.
In terms of year-to-date performance, PayPal has lagged behind both Visa and Mastercard, which have recorded returns of 7% and 2.5%, respectively, while Apple shares have dropped by 17.8%.
PYPL Stock Performance
Image Source: Zacks Investment Research
While PayPal’s low valuation warrants consideration, potential investors are left pondering if now is the right time to buy. Let’s explore further.
Prospects Bolstered by Strong Portfolio
PayPal’s portfolio strength fosters solid and trusted relationships with merchants and consumers alike. The company’s two-sided platform facilitates direct financial interactions between customers and merchants. Investments in branded checkout, person-to-person (P2P) payments, and the Venmo platform have driven total active account growth.
Anticipation surrounding Fastlane adoption suggests increased transactional volumes, with new partnerships inked with entities such as NBCUniversal, Roku, and StockX. PayPal forecasts a transaction margin in dollar terms, excluding interest on customer balances, to grow at least 5% by 2025, aiming for high-single-digit growth by 2027 and over 10% in the longer term.
Fastlane, which optimizes the guest checkout experience by allowing users to finalize purchases with a single click, marks a significant addition. Collaborations with Adyen, Global Payments, and Pfizer are likely to draw more merchants to Fastlane. Notably, approximately 75% of Fastlane’s users are either new or previously inactive PayPal users, showcasing a fresh influx of interest.
In an effort to enhance merchant experiences, PayPal has expanded value-added services. In Q4 2024, it introduced FX-as-a-Service, an automated currency conversion service, which is already operational on Meta Platforms. Network tokens facilitating automated billing are also live with merchants like Instacart, Mint Mobile, and Poshmark. Overall, expanding these services is expected to positively influence transaction margins.
Growing Partner Ecosystem Benefiting PYPL’s Future
PayPal’s partnerships with entities like Fiserv, Adyen, Amazon, Global Payments, and Shopify are propelling its future prospects.
Notably, PayPal has recently become an additional processor for Shopify Payments in the U.S., integrating its branded checkout solutions. This development streamlines operations for business owners. Furthermore, its collaboration with Amazon introduces PayPal Checkout for small and medium-sized businesses, enhancing the Buy with Prime offering. PayPal has also worked with Apple and Google to integrate the Venmo debit card with their respective payment systems.
Positive Earnings Guidance from PayPal
PayPal has reiterated its non-GAAP earnings per share guidance for 2025, predicting a growth range between 6-10%, with expectations of higher growth in the low teens for 2027. Long-term projections suggest growth exceeding 20%.
The Zacks Consensus Estimate for 2025 earnings is currently $4.98 per share, showing a 1% decrease over the past month, but indicating a growth of 7.1% compared to 2024.
PayPal Holdings, Inc. Price and Consensus
PayPal Holdings, Inc. price-consensus-chart | PayPal Holdings, Inc. Quote
PayPal has consistently outperformed the Zacks Consensus Estimate in each of the last four quarters, with an average surprise of 14.26%.
PayPal: A Hold for Now
Amid a robust portfolio, a healthy partner ecosystem, and an appealing valuation, the stock appears interesting for long-term investors. However, increasing competition poses threats to PayPal’s near-term prospects, particularly given the ongoing slowdown in unbranded volume.
Currently, PayPal shares are trading below both the 50-day and 200-day moving averages, indicating a bearish trend.
PYPL Shares Positioned Below Key Moving Averages
Image Source: Zacks Investment Research
PayPal currently holds a Zacks Rank of #3 (Hold), suggesting that investors should consider waiting for a more optimal entry point for accumulating shares.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
