PayPal shares decline 9% – a buying opportunity for investors targeting undervalued stocks

PayPal’s Q2 2025 financial results indicate a potential 25% upside from the stock’s current levels towards its fair value.

In Q2 2025, PayPal Holdings, Inc. (NASDAQ: PYPL) reported revenue of 8.29 billion USD, marking a 5% year-on-year increase. Adjusted earnings per share stood at 1.40 USD, exceeding analysts’ expectations by approximately 10 cents. Total payment volume reached 443.5 billion USD, up 6%, while branded payments through PayPal and Venmo grew by only 5%, falling short of internal targets. The company announced strategic initiatives, including the launch of the PayPal World platform, the adoption of agentic commerce, the integration of stablecoins, and AI-based solutions, all positioned as long-term growth drivers. However, management warned of risks associated with heightened competition in branded payments, lower fee structures in Asia, and an anticipated decline of 125 million USD in interest-related income in the second half of the year.

Despite strong quarterly results and an upward revision of its full-year guidance, PayPal Holdings’ stock price fell by 9% following the earnings release. The weak growth in branded transactions and cautious Q3 outlook signalled heightened investor prudence amid elevated market expectations.

This article examines PayPal Holdings, Inc., outlining the company’s key revenue streams and providing a fundamental analysis of PYPL stock performance. It also includes a technical analysis of PayPal Holdings’ shares, forming the basis for a PayPal Holdings stock forecast for the 2025 calendar year.

PayPal Holdings, Inc. was founded in December 1998 by Max Levchin, Peter Thiel, and Luke Nosek as Confinity. The company initially developed security software for hand-held devices but later shifted its focus to digital payments. In 2000, Confinity merged with X.com, an online banking company founded by Elon Musk, and was renamed PayPal in 2001.

Today’s PayPal Holdings offers online payment solutions, enabling individuals and businesses to send and receive money worldwide. Its services include digital wallets, payment processing for merchants, user-to-user transfers, and fintech solutions.

PayPal went public on the NASDAQ under the PYPL ticker on 15 February 2002. Later that year, the company was acquired by eBay and became its primary payment service. In 2015, PayPal became independent again and resumed trading under the same ticker, PYPL.

Image of the company name PayPal Holdings, Inc.

About PayPal Holdings, Inc.’s CEO

Alex Chriss has served as the Chief Executive Officer (CEO) of PayPal Holdings, Inc. since September 2023, having joined the company from Intuit, where he spent nearly two decades and was recognised as a key architect of the firm’s growth. At Intuit, he led the Small Business and Self-Employed Group. He was instrumental in the 12 billion USD acquisition of Mailchimp, which provided the company with new avenues for growth and customer loyalty. His expertise is particularly strong in digital transformation, product development, and strategic partnerships.

Since joining PayPal, Chriss has focused on enhancing business efficiency, restructuring costs, simplifying the product portfolio, and strengthening the company’s emphasis on customer value. He initiated the launch of the PayPal World platform, advanced AI integration, and promoted new payment formats such as agentic commerce and cryptocurrency solutions. These actions reflect his commitment to a comprehensive modernisation of the platform and positioning it for future growth.

Given his achievements at Intuit, swift adaptation to PayPal’s corporate environment, and bold initiatives within the company, the likelihood that he will successfully elevate PayPal Holdings to a new level is considered high.

PayPal Holdings, Inc.’s main revenue sources

PayPal’s revenue comes from a variety of sources, mainly related to digital payments. The primary revenue streams are divided into subcategories and outlined below:

• Transaction fees for merchants: PayPal charges merchants a fee for each transaction processed on the platform, typically a percentage of the transaction amount plus a flat fee. These commissions apply to payments for goods and services

• Transaction fees for merchants: PayPal charges merchants a fee for each transaction processed on the platform, typically a percentage of the transaction amount plus a flat fee. These commissions apply to payments for goods and services
• Transaction fees for consumers: PayPal charges a fee for some consumer operations, such as instant transfers from a PayPal or Venmo account to a bank account or a debit card
• International transaction fees: for international transfers, PayPal adds extra fees, typically as a percentage of the transaction amount plus currency conversion fees, if applicable
• Cryptocurrency transaction fees: PayPal charges fees for buying, selling, or transferring cryptocurrencies through its platform. These vary depending on the transaction amount

• Revenue from additional services:
• Interest on loans and loan products: PayPal provides financing, such as PayPal Working Capital and PayPal Business Loans for merchants, and consumer loans in some markets. The company earns interest and fees on these loans, with annual interest rates ranging from 15% to 30%
• Interest on customer account balances: funds held in PayPal accounts are placed in liquid investments or interest-bearing accounts, generating revenue for PayPal that is not shared with account holders
• Subscription fees: PayPal charges merchants for premium features such as PayPal Payments Pro, which provides broader payment processing tools, or Payflow Pro for customisable payment gateways
• Partner and referral fees: PayPal generates revenue

through partnerships with companies such as Visa, Mastercard, and e-commerce platforms, as well as referral fees from cashback programs and partner services

• Gateway fees: through services like Payflow, PayPal charges fees for integrating payment gateways, including transaction fees and additional services like fraud protection
• Revenue from subsidiaries:
• Venmo: generates income through fees for instant transfers, credit card payments, and merchant transactions via Venmo’s payment acceptance features
• Braintree: this payment processing platform charges merchants transaction processing fees, often tailored to larger enterprises, contributing to PayPal’s overall revenue
• Xoom: this international money transfer service generates revenue from transfer fees and currency exchange margins on international transfers
• Other revenue sources include:
• Card reader sales and fees: services such as PayPal Here and Zettle provide mobile card readers for offline payments, bringing in revenue from device sales and transaction fees
• Interchange fees: in some cases, PayPal receives a share of interchange fees when users make payments with linked debit or credit cards through partnerships with card networks
• Cryptocurrency-related services: in addition to transaction fees, PayPal may generate additional revenue from cryptocurrency storage or related services as it expands its digital assets offerings

PayPal’s revenue primarily comes from the sources listed above, with transaction fees contributing to the bulk of revenue, supported by income from additional services and subsidiaries. This diversified model supports PayPal’s operations in over 200 markets and serves millions of active accounts.

PayPal Holdings, Inc. Q4 2024 report

On 4 February 2025, PayPal Holdings released its Q4 2024 report. The key highlights are as follows:

• Revenue: 8.36 billion USD (+4%)
• Net income: 1.21 billion USD (-2%)
• Earnings per share: 1.19 USD (+5%)
• Operating profit: 1.5 billion USD (+2%)

Account and activity metrics:

• Active accounts: 434 (+2%)
• Monthly active accounts: 229 (+2%)
• Number of payment transactions: 6.62 (-3%)
• Transactions per active account: 60.60 (+3)
• TPA ex. PSP (unbranded card processing): 34.90 (+4%)

CEO Alex Chriss stated that PayPal ended 2024 on a strong note, delivering results that exceeded expectations. He highlighted that throughout 2024, the company focused on improving execution and repositioning the business, which laid a solid foundation for long-term profitable growth. Chriss pointed to specific improvements in branded payments, P2P services, and Venmo, as well as progress in its price-to-value strategy, which had begun to impact results positively.

For the calendar Q1 2025, PayPal forecast earnings per share in the range of 1.15 to 1.17 USD, up from 1.08 USD for the corresponding period last year. For the full year 2025, the company projected adjusted EPS between 4.95 USD and 5.10 USD, compared to 4.65 USD last year.

At its Investor Day in February 2025, PayPal unveiled a new unified platform for merchants, PayPal Open, and announced a partnership with Verifone as well as its plans for the international expansion of its fast payment service, Fastlane. The company also reaffirmed its financial targets for 2025 and expressed optimism about future growth.

Investors reacted negatively to PayPal’s Q4 2024 report, sending its shares down by 11% despite better-than-expected income and revenue. The main reason for the decline was a slowdown in branded transactions, raising concerns that users were switching to competitors such as Apple Pay and Google Pay. Investor scepticism was further intensified by additional pressure on commission revenue and uncertainty about whether new initiatives like PayPal Open and Fastlane could drive substantial growth in the future. Elevated market expectations also played a role, as investors expected a faster acceleration in growth.

PayPal Holdings, Inc.’s stock buyback program

PayPal Holdings, Inc. announced a new stock buyback program in its Q4 2024 report, released on 4 February 2025. The company’s Board of Directors approved a 15 billion USD share repurchase plan, reflecting confidence in PayPal’s long-term value and its commitment to returning capital to shareholders.

This new program builds on the company’s current capital allocation strategy, following significant share repurchase activity in 2024. Over the full year of 2024, PayPal bought back approximately 75 million shares, returning 6.0 billion USD to shareholders.

The new 15 billion USD program replaces all previous initiatives and provides PayPal with the flexibility to reduce the number of outstanding shares further, potentially boosting EPS over time by concentrating ownership among the remaining shareholders.

CEO Alex Chriss and CFO Jamie Miller emphasised that the program reflects PayPal’s strong financial position and the undervaluation of its shares, which closed 2024 at levels they believe do not fully reflect the company’s growth potential, particularly in high-margin segments such as branded payments and Venmo.

Buybacks were expected to be executed depending on market conditions, the share price, and the company’s liquidity needs, with no fixed completion date set.

PayPal Holdings, Inc. Q2 2025 financial results

PayPal Holdings released its Q2 2025 financial results on 29 July 2025. Key figures are as follows:

• Revenue: 8.29 billion USD (+5%)
• Net income: 1.37 billion USD (+10%)
• Earnings per share: 1.40 USD (+18%)
• Operating profit: 1.64 billion USD (+15%)

Account and activity metrics:

• Active accounts: 438 (+2%)
• Monthly active accounts: 226 (+2%)
• Number of payment transactions: 6.22 (-5%)
• Transactions per active account: 58.3 (-4%)
• TPA ex. PSP (unbranded card processing): 35.60 (+4%)

In Q2 2025, PayPal reported revenue growth of 5% to approximately 8.3 billion USD. Adjusted earnings per share came in at 1.40 USD, slightly beating analyst expectations but falling short of the 1.47 USD forecast. Total payment volume (TPV) rose 6% to 443.5 billion USD. Venmo was a standout performer, with revenues growing by more than 20%, delivering its best quarterly result in three years.

The company raised its full-year guidance for 2025, now anticipating adjusted earnings per share of between 5.15 and 5.30 USD (up from the previous range of 4.95 to 5.10 USD). Transaction-based revenue is expected to grow to 15.35 – 15.50 billion USD, representing a 5–6% increase year-on-year. For Q3 2025, the forecast for adjusted earnings per share is between 1.18 and 1.22 USD, roughly in line with market expectations.

Investor reaction to the report was negative. Despite earnings growth and upgraded guidance, PayPal’s shares fell by 9% on the day of the release, marking one of the weakest performances on the Nasdaq. This was attributed to concerns over slowing growth in branded checkout and an overall deceleration in payment volume growth.

There was also a negative sentiment driven by competitive pressures, although fundamental metrics remained robust. Nevertheless, PayPal shares are considered among the strongest on the market according to Investor’s Business Daily ratings and continue to attract steady interest from institutional investors.

Analysis of key growth drivers and risks for PayPal Holdings, Inc.

Following the earnings release, several challenges and risks for PayPal were identified. Firstly, branded checkout volumes (payments through PayPal and Venmo branded products) increased by only 5% – below expectations and slowing compared to the previous quarter. Competition from Apple Pay and Google Pay is intensifying. Secondly, the company warned that declining interest rates are expected to adversely impact margins, potentially leading to losses of up to 125 million USD in the second half of the year due to reduced income from customer balances. It was also noted that the extension of a key payment partner contract may have temporarily inflated current margin figures.

Nonetheless, PayPal has emerging new growth drivers. To begin with, the launch of PayPal World – an international digital wallet platform connecting over two billion users (including UPI, Tencent Tenpay, Mercado Pago, and Venmo) – with support for the stablecoin PYUSD and agentic commerce integrated with AI. Another growth catalyst is the expansion of cryptocurrency acceptance via the Pay with Crypto feature, which offers instant conversion, reduces transaction fees to 0.99%, and cuts costs by up to 90% compared to international card payments. Additionally, the PSP segment (unbranded card processing outside PayPal) is stabilising, while P2P payments and Venmo continue to grow.

Financial analysis of PayPal Holdings, Inc.

Operating trends:

• Total payment volume (TPV): growth of 5–6% per annum, noticeably weaker than the pre-COVID rate of 20%. The core US market has reached a plateau, and it is the fast-growing emerging markets that are compensating for sluggish domestic dynamics.
• Take-rate: 1.9% (flat) – PayPal’s fee per dollar processed is not increasing, as the company is subsidising its Buy Now, Pay Later (BNPL) services, while large retailers are shifting to Braintree’s unbranded processing, which carries lower fees than the traditional PayPal checkout button.
• Active accounts: +2% – the market is nearing saturation, while the average number of transactions per user has declined from 61 to 58. As a result, further TPV growth now depends on increasing transaction frequency among existing users rather than acquiring new ones.

Profitability and earnings quality:

• Operating margin: 18% (Q2 2025) versus a 12-quarter average of 16% – PayPal is gradually reducing excess expenses following the 2024 restructuring.
• Net margin (TTM): 15%, achieved through a low effective tax rate of 18%, which is below the sector average and boosts bottom-line profitability.
• ROE (TTM): 13%, with levered equity of 20.2 billion USD – down from historical averages of 20% due to treasury stock accumulation and increased debt.

Cash flows and liquidity (first half of 2025 vs first half of 2024):

• Operating cash flow (OCF): 2.06 billion USD (-40%) – the company had to lock up more funds in working capital and increase provisions for credit losses.
• Capital expenditure (CapEx): 402 million USD (+15%) – the bulk of investments went towards expanding cloud infrastructure and rolling out Zettle offline terminals.
• Free cash flow (FCF): 1.66 billion USD – FCF margin fell from 19% to 10%, driven by higher working capital outflows and rising credit loss provisions.

Balance sheet strength:

• Net debt: 0.6 billion USD – Net debt is virtually negligible, meaning the company could cover 95% of its liabilities with cash and short-term investments.
• Net debt/EBITDA: < 0.3 – Financial leverage remains low, and even with increased debt for buybacks, the debt load is well within safe limits.
• Equity cushion: 20.2 billion USD – PayPal maintains a robust equity buffer.

Investment valuation:

• P/E (TTM): approximately 14 (share price of 72 USD, EPS 5.2 USD) – this is 25% lower than PayPal’s five-year average valuation, indicating an existing upside potential for PYPL stock.
• EV/EBITDA (TTM): 10 – valuation is in line with its closest competitor, Block, Inc. (NYSE: XYZ), and considerably cheaper than premium peer Adyen N.V.
• DCF fair value: 95 USD (assuming 5% FCF growth, 9% WACC, and 3% terminal growth) – the fair value estimate stands at 95 USD, provided forecasts materialise.

Risks:

• Client base stagnation: growth in active accounts is approaching zero. Sustaining TPV growth will require boosting user activity.
• Competition from Apple Pay, Stripe, and BNPL fintechs: these players offer either lower fees or default-integrated solutions, which puts PayPal at risk of losing market share and forces it into pricing wars.
• Credit risk from BNPL Portfolio: PayPal is directly funding its BNPL services, with loan loss reserves rising 25% over the year, indicating a deterioration in borrower quality.
• Regulatory pressure in the EU: stricter compliance requirements for payment systems in the EU are increasing

PayPal’s operating costs.

• Reputational and operational risks: in 2024–2025, PayPal reduced its workforce by approximately 7%. Key engineering teams are under pressure due to the integration of BNPL, crypto, and Zettle offline terminals. Any product release delays could exacerbate customer churn to competitors.

Financial analysis summary:

PayPal remains a profitable company that consistently generates free cash flow, owing to its large and resilient merchant and consumer network, which is difficult to replicate. However, its growth trajectory has shifted away from startup-level acceleration. The business has matured into a stable technology company, with revenue and earnings expanding at a more moderate pace. Profitability has recovered following a weaker 2024, yet free cash flow levels remain below investor expectations. The balance sheet appears prudent: debt is minimal, and a portion of profits is allocated to share buybacks, which helps support the stock price. Currently, the market is valuing PayPal at a discount – approximately 25% below its historical multiples.

Expert forecasts for PayPal Holdings, Inc. stock

• Barchart: 15 out of 42 analysts rated PayPal Holdings’ stock as a Strong Buy, 2 as a Moderate Buy, 23 as Hold, and 3 as Strong Sell. The highest target price is 105 USD, and the lowest is 56 USD
• MarketBeat: 19 out of 35 experts assigned the stock a Buy rating, 14 recommended Hold, and 2 advised Sell. The highest target price is 117 USD, and the lowest is 65 USD
• TipRanks: 10 out of 25 surveyed analysts rated the stock as Buy, 13 as Hold, and 2 as Sell. The price target range extends from an upper limit of 105 USD to a lower boundary of 62 USD
• Stock Analysis: 5 out of 33 experts rated PayPal shares as a Strong Buy, 11 as Buy, 15 as Hold, and 2 as Strong Sell. The highest forecast is 105 USD, and the lowest is 56 USD.

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PayPal Holdings, Inc. stock price forecast for 2025

The COVID-19 pandemic was the most prosperous period for PayPal Holdings, Inc., with surging demand for online payments enabling the company to more than double its profits, while its share price soared by 230%. However, sustaining such high growth rates proved challenging, especially amid intensifying competition from new market entrants. Consequently, in Q2 2022, PayPal reported a loss of 340 million USD, and its share price plummeted by 80%. Since then, the company has been gradually recovering, with a rising channel pattern forming on the stock chart, and PYPL shares reaching new local highs.

The release of the recent quarterly report triggered a negative reaction from investors, causing the stock to fall from 80 USD to 67 USD. However, the underlying quarterly results were strong. As the emotional sell-off subsides, demand for PayPal shares is returning. Based on the current price dynamics, we examine potential scenarios for PayPal’s stock movement in 2025.

The base-case forecast for PayPal’s shares in 2025 anticipates a price increase from current levels towards the upper boundary of the ascending channel at 95 USD. Supporting this scenario are the company’s ongoing share buyback program, its undervaluation relative to fair value, and the solid financial results posted for the past quarter.

An alternative forecast for PayPal’s stock envisions a breakdown of support at 64 USD. In this case, PYPL shares could decline further to 50 USD. This scenario may unfold if the US economic situation deteriorates. According to recent unemployment data, the number of new jobs has sharply decreased over the past three months, signalling a cooling economy. This, in turn, could lead to a reduction in transaction volumes on PayPal’s platform, thereby impacting the company’s earnings.

PayPal Holdings, Inc. stock analysis and forecast for 2025

Summary

PayPal remains a profitable and resilient company with an extensive ecosystem of users and merchants, helping to ensure stable cash flow and competitive advantages. However, business growth has noticeably slowed compared to its earlier period of rapid expansion, and its core US market has reached maturity. Profitability has improved following the 2024 restructuring; however, free cash flow has declined due to increased provisions for credit losses and rising capital investments. The balance sheet remains robust, with low debt levels, while the ongoing share buyback program continues to support the share price. The current market valuation is still below the company’s historical multiples, which may create potential for revaluation if new initiatives, such as PayPal World and the expansion of cryptocurrency services, are successfully implemented. However, investors should consider risks related to intensifying competition, the slowdown in branded checkout growth, and the impact of interest rates on returns.

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