PayPal's Make-or-Break Moment Ahead: A Discounted Opportunity Amidst Evolving Strategy

PayPal's stock is undervalued at 13x forward earnings, making it an opportunity for investors. Despite its declining dominance, the company is evolving its strategy and has a discounted valuation.

PayPal (PYPL) has been a prominent player in the digital payments industry since its spin-off from eBay in 2015. Despite a period of slower growth and a loss of eBay's revenue, the company has shown resilience and continues to innovate. Analysts and investors alike are now considering PayPal as an undervalued opportunity.

Decline in Dominance and Recovery

In 2018, PayPal faced a significant challenge when eBay announced its intention to replace PayPal with Adyen. This loss was initially felt but was partially offset by the company's rapid growth during the pandemic. PayPal's active accounts grew by 24% in 2020 and 13% in 2021, driven by surging online orders and peer-to-peer payments [1].

However, the company's growth slowed down as the pandemic waned. Active accounts grew by only 2% in 2023, and revenue growth was 8% in 2022 and 2023. This slowdown was exacerbated by inflationary headwinds, competition from other digital payment platforms, and a decline in eBay's revenue [1].

Evolution of Strategy

PayPal's current CEO, Alex Chriss, is focusing on balancing expansion with disciplined spending. The company has been investing in new tools like PayPal Open, PayPal World, and Pay With Venmo to drive growth. Additionally, PayPal has been expanding its buy now, pay later (BNPL) services, cryptocurrency trading tools, and stablecoins to diversify its revenue streams [1].

Analyst Perspectives

Analysts have set various target prices for PayPal. JMP Securities lowered its target from $110 to $100, while Macquarie maintained an outperform rating with a target of $95. Despite these varying opinions, the consensus rating is "Hold" with an average target price of $85.00 [2].

Valuation and Opportunity

PayPal's stock is currently trading at a forward P/E ratio of 13x, which is considered undervalued compared to its historical averages. This valuation reflects the company's evolving strategy and its discounted price relative to its earnings potential. Despite its declining dominance, PayPal remains a reliable long-term play on the secular expansion of the digital payments market [1].

Conclusion

PayPal's stock appears to be undervalued at 13x forward earnings, making it an opportunity for investors. The company's decline in dominance has been offset by its evolving strategy and discounted valuation. While it may not set investors up for life on its own, PayPal remains a solid investment in the digital payments sector.

References:
[1] https://www.fool.com/investing/2025/08/17/could-buying-paypal-stock-today-set-you-up-for-lif/
[2] https://www.marketbeat.com/instant-alerts/filing-paypal-holdings-inc-nasdaqpypl-stock-holdings-raised-by-fcg-investment-co-2025-08-17/