PayPal Holdings Stock Underperforms S&P 500 Despite Q2 Earnings Beat

PayPal Holdings stock has declined 26.9% from its two-year high and 19.8% YTD, underperforming the S&P 500 Index. The stock has traded below its 200-day moving average since late February and below its 50-day moving average since late July. Despite Q2 revenue and EPS beating consensus estimates, the number of payment transactions dropped 5.4% year-over-year, unsettling investor confidence. PayPal has underperformed its peer, Block, Inc., and maintains a "Moderate Buy" rating with a mean price target of $81.17.

PayPal Holdings (PYPL) stock has experienced a notable decline, dropping 26.9% from its two-year high and 19.8% year-to-date (YTD), underperforming the S&P 500 Index. The stock has consistently traded below its 200-day moving average since late February and below its 50-day moving average since late July. Despite strong second-quarter (Q2) 2025 results, including revenue and earnings per share (EPS) beating consensus estimates, the number of payment transactions dropped 5.4% year-over-year, which has unsettled investor confidence [1].

In Q2 2025, PayPal reported net revenues of $8.3 billion, a 5% increase from the previous quarter. GAAP operating income rose 14% to $1.5 billion, while GAAP EPS grew 20% to $1.29. Total Payment Volume (TPV) increased by 6% to $443.5 billion, and active accounts grew by 2% to 438 million. The company also returned $1.5 billion to stockholders through share repurchases [2]. However, the decline in transaction volume has raised concerns among investors, as it suggests a potential slowdown in PayPal's growth trajectory.

The stock's underperformance can be attributed to several factors. Firstly, the decrease in transaction volume may indicate a slowdown in user engagement or growth in the digital payments sector. Secondly, PayPal's recent strategic initiatives, such as the launch of PayPal World and the integration of cryptocurrencies, have not yet fully translated into significant revenue growth. Lastly, the broader market uncertainty, including geopolitical tensions and economic volatility, has contributed to the stock's decline.

Comparatively, PayPal has underperformed its peer, Block, Inc. (SQ), which has seen a more robust performance in the digital payments sector. Despite these challenges, PayPal maintains a "Moderate Buy" rating with a mean price target of $81.17, reflecting a cautious optimism among analysts [3].

Looking ahead, PayPal will need to address the declining transaction volume and demonstrate consistent growth in its strategic initiatives to regain investor confidence. The company's ability to adapt to market conditions and innovate in the digital payments space will be crucial in determining its future performance.

References:

[1] https://www.stocktitan.net/news/PYPL/
[2] https://www.stocktitan.net/news/PYPL/2025/07/29/
[3] https://www.stocktitan.net/news/PYPL/2025/07/29/