PayPal's Hidden Resilience: Why the Stock is a Buy in a Falling Market

The market has been a rollercoaster in 2025, with the S&P 500 rising 4.4% year-to-date (YTD) while PayPal (PYPL) shares have plunged 14%. Yet beneath the volatility, a compelling case emerges: PayPal's fundamentals, valuation, and strategic pivots position it as a rare opportunity for investors seeking resilience and growth.

Stock Performance: Underperforming the Market, but Overdelivering on Value

PayPal's YTD decline of 14% contrasts starkly with the S&P 500's gains, but this underperformance has created a valuation discount that's hard to ignore. The company's shares now trade at just 14x forward earnings, a fraction of Visa's 28x and Mastercard's 31x multiples. This discount reflects near-term macroeconomic headwinds and competition—but not the full picture of PayPal's financial health or growth potential.

Earnings: Profitability Over Top-Line Growth

PayPal's Q1 2025 results highlighted a strategic shift toward profitability. Revenue grew only 1% YoY to $7.8 billion, missing expectations. But adjusted EPS surged 23% to $1.33, trouncing estimates by 15.7%. The focus on trimming low-margin revenue streams boosted transaction margin dollars by 7% to $3.7 billion.

This discipline is paying off. PayPal reaffirmed its 2025 EPS guidance of $4.95–$5.10, slightly below analyst projections of $5.08—but the company's adjusted EPS has consistently beaten estimates over the past five quarters. The path to profitability is clear, even if revenue growth remains muted.

Valuation: Undervalued Relative to Peers

PayPal's forward P/E of 13.74x is half that of Visa and Mastercard, despite its 7.8% revenue growth over three years (vs. the S&P's 5.5%). Its PEG ratio—a measure of growth relative to valuation—is a mere 0.6x, below the S&P 500's average of 1.5x.

Analysts see value here. The average price target is $79.81 (9% upside), with a bullish $125 target implying a 70% rally. Even the most cautious estimates suggest the stock is trading at a discount to its peers and its own long-term growth potential.

Zacks Rank: Hold, but the Bulls Have a Case

Zacks currently assigns PayPal a #3 Hold rating, citing macroeconomic risks and intense competition. While valid concerns, this rating may not fully account for PayPal's undervaluation or its strategic initiatives.

The Hold reflects near-term caution, but PayPal's cash reserves ($15.8 billion) and debt-to-equity ratio (13.4%) are fortress-like. The company is using this strength to return capital to shareholders—buybacks and dividends remain a priority.

Growth Catalysts: BNPL, Venmo, and Omnichannel Play

PayPal isn't standing still. Its Buy Now, Pay Later (BNPL) segment saw a 20% increase in volume in Q1, with users spending 40% more than non-BNPL users. Venmo revenue jumped 20%, and the company is expanding NFC payments in Europe—a market where rivals like Apple Pay lag.

These moves are critical. While legacy revenue streams face margin pressure, PayPal's newer segments are high-margin and sticky. The 20% growth in BNPL and Venmo suggests these areas could offset softness in traditional payments.

Risks: Competition and Macro Uncertainty

The risks are real. Apple Pay, Shopify, and fintech upstarts are eroding PayPal's dominance. Geopolitical tensions and tariff hikes could further strain margins. Yet PayPal's valuation already accounts for these headwinds.

Conclusion: Buy the Dip

PayPal's stock is caught in a perfect storm of macro fears and competition—but its fundamentals, valuation, and strategic bets make it a compelling contrarian play. The Zacks Hold rating is a reminder to tread cautiously, but at 14x earnings and with a fortress balance sheet, this is a stock to accumulate.

Investors seeking a blend of value and growth should consider adding PayPal. The path to $125 isn't guaranteed, but the odds tilt toward resilience—and a potential multiyear turnaround.

Stay disciplined, but don't overlook PayPal's hidden strengths in this volatile market.