PayPal Trades Cheaper Than Industry: How to Play the Stock?

PayPal Holdings PYPL is currently trading at a valuation that looks hard to ignore. With a price-to-earnings (P/E) multiple of 11.93, the stock sits well below its three-year historical average of 15.05 and significantly under the Zacks Financial Transaction Services industry average of 21.55. In comparison, peers Visa V and Mastercard MA command much richer valuations of 26.42X and 31.18X, respectively. The valuation gap highlights PayPal’s discounted positioning in the market, raising the question of whether this dislocation presents an attractive entry point for investors.Still, valuation alone does not guarantee upside. PayPal faces macroeconomic uncertainty, heightened competition from fintech peers and the need to accelerate innovation in a fast-changing payment landscape. Investors must evaluate how effectively the company is addressing these challenges, particularly through product innovation, margin expansion and ecosystem development. Only by connecting PayPal’s fundamentals to its discounted multiple can one determine if the stock offers genuine long-term value.Image Source: Zacks Investment ResearchThe stock has not been immune to market headwinds. PYPL shares have declined 21.1% year to date, weighed down by macroeconomic uncertainty, fraud concerns in Europe, slowing U.S. retail spending, tariff-related pressures in Asia and heightened competition in the digital payment space.Image Source: Zacks Investment ResearchYet, earnings estimate revisions tell a more encouraging story. The Zacks Consensus Estimate for 2025 earnings is pegged at $5.23 per share, implying 12.5% growth over 2024. For 2026, estimates rise further to $5.79 per share, suggesting another 10.6% year-over-year increase. These upward revisions point to improving fundamentals that may not be fully reflected in today’s share price. Image Source: Zacks Investment ResearchLet’s explore the reasons behind this upbeat sentiment for PYPL Stock.PayPal’s Innovation and Strategic PartnershipsRecent announcements underscore PayPal’s ability to innovate and expand relevance. A multi-year partnership with Google aims to deliver next-generation digital commerce experiences powered by artificial intelligence. This initiative focuses on AI-driven shopping tools and the development of open, secure standards like Google’s Agent Payments Protocol, blending Google’s AI capabilities with PayPal’s payments expertise and trusted identity solutions. It will also involve embedding PayPal’s offerings — such as the PayPal branded checkout, Hyperwallet and PayPal Payouts solutions — across Google products to deliver seamless, top-tier user experiences.On the product side, PayPal recently rolled out PayPal Links, a personalized feature that allows users to send and receive money through a simple, shareable link. This capability not only drives new customer acquisition but also integrates more users into PayPal’s ecosystem. Similarly, Venmo and PayPal customers are set to gain early access to Perplexity’s AI-powered Comet browser, along with a complimentary 12-month subscription to Perplexity Pro, enhancing user engagement and brand stickiness.Transforming PayPal Into a Broader Commerce PlatformPayPal is steadily evolving beyond its roots in digital payments. Its “PayPal World” initiative seeks to create interoperability across nearly 2 billion global wallet users by connecting PayPal, Venmo, Mercado Pago, Tenpay Global and NPCI’s UPI. This API-based platform could transform PayPal into a truly global commerce network, unlocking new cross-border opportunities for merchants and consumers alike.The company is also deepening its push into agentic commerce through AI partnerships with Anthropic and Salesforce. Alongside these moves, PayPal is expanding its role in cryptocurrency with the PYUSD stablecoin and its “Pay with Crypto” option, positioning itself for relevance in emerging digital commerce trends. These efforts illustrate how PayPal is preparing to be a foundational player in next-generation payments.Venmo and Branded Checkout: PayPal’s Growth EnginesVenmo remains a standout growth driver. In the second quarter of 2025, Venmo revenues jumped more than 20%, while total payment volume grew 12% — its strongest growth rate in three years. Venmo debit card usage is accelerating, with monthly active accounts up 40%, while “Pay with Venmo” total payment volume surged more than 45%. At the same time, branded checkout continues to expand. More than 60% of U.S. branded volume is now transacted through PayPal’s upgraded experience, and international rollouts in Germany and the U.K. are underway. Together, Venmo and branded checkout form PayPal’s strongest competitive pillars, reinforcing its role across both online and in-store transactions.PayPal: Seizing the PullbackPayPal’s current valuation leaves little doubt that the market is underappreciating its long-term potential. Trading at a steep discount to both historical levels and peers like Visa and Mastercard, the stock offers investors a rare entry point into a global payment leader. While near-term challenges — ranging from macroeconomic headwinds to intensifying competition — cannot be dismissed, PayPal’s improving earnings outlook, strong balance sheet and multi-pronged growth strategy reinforce confidence in its recovery path. Initiatives in AI, stablecoins, global commerce and Venmo expansion highlight management’s focus on driving sustainable relevance and profitability. For investors with a long horizon, today’s weakness looks more like temporary turbulence than a structural decline. PayPal remains well-positioned as a buy-the-dip opportunity in digital commerce.PayPal currently has a Zacks Rank #2 (Buy) and is trading cheap, as suggested by the Value Score of A. 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(V): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks