Is PayPal Stock Poised for a Rally?

We think PayPal (PYPL) stock could be a good value buy. It is currently trading lower than average valuation, is growing, even though modestly, and has strong margins to go with its low valuation.

Buying stocks with low valuations or trading well below their peaks but maintaining strong margins allows investors to capture mean reversion and valuation re-rating potential. The downside risk is potentially less because high-margin businesses can sustain earnings and recover faster when sentiment or market conditions improve

What Is Happening With PYPL

PYPL may be down -32% so far this year but is now 37% cheaper based on its P/S (Price-to-Sales) ratio compared to 1 year ago, and also trades at a P/E (Price-to-Earnings) ratio that is below S&P 500 median.

The stock may not reflect it yet, but here is what’s going well for the company. Operational efficiency and strategic pricing, particularly in Braintree, are expanding margins, despite some deliberate transaction volume reductions. Q3 2025 saw 7% revenue growth, with strong Venmo contributions. While management raised full-year EPS guidance to $5.35-$5.39, the stock is down over 30% year-to-date. Intense competition and lingering concerns about transaction volume growth in core segments weigh on its discounted valuation.

PYPL Has Reasonable Fundamentals

• Revenue Growth: 4.5% LTM and 6.7% last 3 year average. Low growth, but this is a margin and value play.
• Strong Margin: Nearly 17.9% 3-year average operating margin.
• No Major Margin Shock: PayPal has avoided any large margin collapse in the last 12 months.
• Modest Valuation: Despite encouraging fundamentals, PYPL stock trades at a PE multiple of 11.2

Below is a quick comparison of PYPL fundamentals with S&P medians.

*LTM: Last Twelve Months

But What Is The Risk Involved?

While PYPL stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. PayPal lost about 20% during the 2018 correction, dropped 31% amid the Covid pandemic, and plunged over 83% in the inflation shock. Even with strong fundamentals, the stock has seen sharp declines when markets turn sour. It shows that no matter how solid the story, risk is real when volatility hits. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read PYPL Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

For more details and our view, see Buy or Sell PYPL Stock.

Stocks Like PYPL

Not ready to act on PYPL? Consider these alternatives:

1. Accenture (ACN)
2. Adobe (ADBE)
3. Carrier Global (CARR)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Meaningfully below 1Y high
3. Current P/S < last few year average
4. Strong operating margin
5. P/E ratio below S&P 500 median

A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:

• Average 6-month and 12-month forward returns of 12.7% and 25.8% respectively
• Win rate (percentage of picks returning positive) of > 70% for both 6-month and 12-month periods
• Strategy consistent across market cycles

Smart Investing Begins With Portfolios

Individual picks can be volatile but staying invested is what matters. A diversified portfolio helps you stay the course, capture upside and reduce downside

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.