Is PayPal Stock a Buy, Sell or Hold Post 17% Year-to-Date Dip?

PayPal PYPL shares have dropped 17% year to date, which can be attributed to intensifying competition in the fintech industry from the likes of Apple Pay and others. A challenging macroeconomic environment with growing risk of a recession attributed to U.S. President Donald Trump’s plan to levy tariffs on trade partners China, Canada and Mexico is expected to be an overhang on the stock.

PayPal shares have declined 24.3% since hitting a 52-week high of $93.66 on Dec. 9, 2024. However, the stock is cheap, as suggested by the Value Score of B. PYPL stock is trading at a significant discount with a forward 12-month P/E of 13.7X compared with the Zacks Financial Transaction Services industry’s 23.56X. 

PYPL’s P/E Ratio (F12M)

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PayPal shares have appreciated 6.5% in the trailing 12-month period, underperforming the industry’s appreciation of 17.7%.

PYPL Stock’s Performance

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PayPal shares are trading below the 50-day and 200-day moving averages, indicating a bearish trend.

PYPL Shares Trade Above 50-Day & 200-Day SMAs

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So, is PayPal stock a buy, sell or hold at the current price level? Let’s analyze.

PYPL’s Strong Portfolio to Aid Prospects

Portfolio strength has been helping PayPal maintain deep and trusted relationships with merchants and consumers. Its two-sided platform helps develop direct financial relationships with customers and merchants. PYPL’s investments in improving branded checkout, person-to-person (P2P) and Venmo helped in driving total active accounts, which increased 2% year over year to 434 million in 2024. The number of payment transactions increased 5% year over year to 26.33 million. 

Expanding clientele benefited total payment volume (TPV), which increased 10% year over year to $1.68 trillion in 2024. Transaction margin in dollar terms increased 7% year over year while Buy-Now-Pay-Later TPV grew 21% year over year to $33 billion. Strong adoption of Fastlane is expected to boost future volumes as PYPL ink deals with NBCUniversal, Roku and StockX. PayPal expects transaction margin in dollar terms (ex-interest on customer balances) to grow at least 5% in 2025 and high-single-digit growth for 2027. Over the long term, this is expected to grow at more than 10%.

Fastlane, which enhances the guest checkout experience by allowing users to complete their purchase in one click, is a noteworthy addition to the portfolio. PayPal’s partnership with Adyen, Global Payments and Pfizer is expected to attract more merchants to Fastlane. The solution is not only improving conversion for PayPal’s merchants but also making more shoppers familiar with PayPal. Roughly 75% of Fastlane consumers are new or dormant PayPal users, while 25% of Fastlane users never had a PayPal account.

PayPal is expanding value-added services to boost the merchant experience. In the fourth quarter of 2024, PYPL launched FX-as-a-service, which is an automated currency conversion, and the platform is already live on Meta Platforms META. PYPL’s network tokens for automated billing capabilities are live with merchants, including Instacart, Mint Mobile and Poshmark. Expanding value-added services is expected to drive transaction margin in dollar terms.

PayPal Everywhere, which was launched in September 2024, is driving significant increases in debit card adoption and opening new categories of spend. In the fourth quarter of 2024, PYPL added more than 1.5 million first-time PayPal debit card users and debit card TPV was up nearly 100%, with the most active reward categories being gas, groceries and restaurants. Venmo’s user base grew 4% year over year in the fourth quarter of 2024, reaching more than 64 million monthly active accounts. 

Expanding Partner Base Aids PYPL’s Prospects

PayPal’s expanding partner base, including Fiserv, Adyen, Amazon AMZN, Global Payments and Shopify SHOP, is driving prospects. 

PayPal is now an additional processor for Shopify Payments in the United States. Its branded checkout solutions are now integrated into Shopify Payments. This creates a single and unified experience for business owners to drive operational efficiency. PayPal’s partnership with Amazon now brings PayPal Checkout to SMBs offering Buy with Prime. Its collaboration with Apple and Google to integrate the Venmo debit card with Apple Pay and Google Pay has been a noteworthy development. 

PayPal is a top payment method for advertisers and consumers globally across Meta Platforms’ family of apps. Creators and developers are using Hyperwallet. META also uses Braintree for credit card processing.

PayPal Offers Positive Earnings Guidance

PayPal reiterated 2025 non-GAAP earnings per share guidance growth range between 6-10% with higher low teens growth for 2027. Over the long term, PayPal is expected to grow at more than 20%. 

The Zacks Consensus Estimate for 2025 earnings is pegged at $5.02 per share unchanged over the past 30 days, suggesting 7.96% growth over 2024. 

PYPL’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 14.26%.
 

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Conclusion

PayPal’s robust portfolio, expanding partner base and cheap valuation are key drivers that make the stock attractive to long-term investors. However, intensifying competition is expected to hurt PayPal’s prospect in the near term. Continuing deceleration in unbranded volume is a concern.

PayPal currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable point to start accumulating the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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