PayPal PYPL shares are trading cheap, as suggested by the Value Score of B.

In terms of forward 12-month P/E, PYPL stock is trading at 11.86X compared with the Zacks Financial Transaction Services industry’s 22.34X. The stock is cheaper than competitors, including Visa V, Mastercard MA and Apple AAPL. 

Shares of Visa, Mastercard and Apple are currently trading at P/E of 27.39X, 31.51X and 26.46X, respectively.

PYPL’s P/E Ratio (F12M)

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However, PayPal shares have dropped 25.7% year to date, which can be attributed to intensifying competition in the fintech industry from the likes of Visa, Mastercard, Apple Pay, Adyen 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, including China, Canada and Mexico, is expected to remain an overhang on the stock.

PayPal shares have underperformed Visa, Mastercard and Apple year to date. While shares of Visa and Mastercard have returned 7% and 2.5%, respectively, Apple shares have dropped 17.8%.

PYPL Stock’s Performance

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Although PayPal’s cheap valuation is noteworthy, is it worth buying at current prices? Let’s dig deep to find out.

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. 

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. 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.

Expanding Partner Base Aids PYPL’s Prospects

PayPal’s expanding partner base, including Fiserv, Adyen, Amazon, Global Payments and Shopify, 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 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 $4.98 per share down by 1% over the past 30 days, suggesting 7.1% 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.)

Here is Why PYPL Shares are a Hold

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 prospects in the near term. Continuing deceleration in unbranded volume is a concern.

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

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

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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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Apple Inc. (AAPL) : Free Stock Analysis Report

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PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report

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

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