PayPal Stock Slips As Growth Slows. Time To Buy?

PayPal (NASDAQ:PYPL) stock has been a laggard this year, declining by about 17% year-to-date, compared to the S&P 500 which has gained about 2% over the same period. PayPal’s financial performance has been mixed. Over Q1 2025, the company saw earnings come in ahead of estimates at $1.33 per share, although revenue missed estimates at $7.8 billion, up just 1% compared to the last year, as the company prioritized profitability over volumes, reducing its lower-margin revenue streams. The U.S. trade war has impacted PayPal as it has resulted in economic uncertainty that can reduce consumer spending while hampering cross-border e-commerce and payments volumes, which are crucial to PayPal’s revenue. Moreover, competition has also been intensifying with the likes of Apple Pay and Shopify gaining traction in online checkout, challenging PayPal’s dominance.

Image by Raphael Silva from Pixabay

However, PayPal stock looks reasonably attractive at the current market price of around $71.  We arrive at our conclusion by comparing the current valuation of PYPL stock with its operating performance over the recent years, as well as its current and historical financial condition. Our analysis of PayPal along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a strong operating performance and financial condition, as detailed below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

How Does PayPal’s Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, PYPL stock looks slightly cheap compared to the broader market.

• PayPal has a price-to-sales (P/S) ratio of 2.3 vs. a figure of 3.0 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 9.9 compared to 20.5 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 17.8 vs. the benchmark’s 26.4

How Have PayPal’s Revenues Grown Over Recent Years?

PayPal’s Revenues have seen some growth over recent years.

• PayPal has seen its top line grow at an average rate of 7.8% over the last 3 years (vs. increase of 5.5% for S&P 500)
• Its revenues have grown 6.8% from $30 Bil to $32 Bil in the last 12 months (vs. growth of 5.5% for S&P 500)
• Also, its quarterly revenues grew 4.2% to $7.8 Bil in the most recent quarter from $7.7 Bil a year ago (vs. 4.8% improvement for S&P 500)

How Profitable Is PayPal?

PayPal’s profit margins are around the median level for companies in the Trefis coverage universe.

• PayPal’s Operating Income over the last four quarters was $5.8 Bil, which represents a moderate Operating Margin of 18.1% (vs. 13.2% for S&P 500)
• PayPal’s Operating Cash Flow (OCF) over this period was $7.5 Bil, pointing to a moderate OCF Margin of 23.4% (vs. 14.9% for S&P 500)
• For the last four-quarter period, PayPal’s Net Income was $4.1 Bil – indicating a moderate Net Income Margin of 13.0% (vs. 11.6% for S&P 500)

Does PayPal Look Financially Stable?

PayPal’s balance sheet looks strong.

• PayPal’s Debt figure was $9.9 Bil at the end of the most recent quarter, while its market capitalization is $70 Bil (as of 6/13/2025). This implies a strong Debt-to-Equity Ratio of 13.4% (vs. 19.9% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $11 Bil of the $81 Bil in Total Assets for PayPal.  This yields a strong Cash-to-Assets Ratio of 13.3% (vs. 13.8% for S&P 500)

How Resilient Is PYPL Stock During A Downturn?

PYPL stock has seen an impact that was slightly worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

Inflation Shock (2022)

• PYPL stock fell 41.9% from a high of $308.53 on 23 July 2021 to $179.32 on 1 December 2021, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is 197.35 on 8 December 2021 and currently trades at around $71

Covid Pandemic (2020)

• PYPL stock fell 20.3% from a high of $121.30 on 24 July 2019 to $96.64 on 23 October 2019, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 14 February 2020

Putting All The Pieces Together: What It Means For PYPL Stock

In summary, PayPal’s performance across the parameters detailed above are as follows:

• Growth: Strong
• Profitability: Neutral
• Financial Stability: Very Strong
• Downturn Resilience: Neutral
• Overall: Strong

This is aligned with the stock’s moderate valuation because of which we think it is fairly priced, meaning that the stock could be a reasonably strong buy.

While there might be some upside for PYPL stock, the Trefis Reinforced Value (RV) Portfolio, has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

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