Why PayPal (PYPL) is a Prime Value Play for 2025

For contrarian value investors, PayPal (PYPL) has emerged as a compelling opportunity in 2025. Despite a stock price that remains 72% below its all-time high, the company’s valuation metrics, strategic reinvention, and improving fundamentals suggest it is being unfairly discounted by a market fixated on short-term volatility. Let’s break down why this could be a prime entry point.

Undervaluation: A Contrarian’s Dream

PayPal’s current Price-to-Earnings (P/E) ratio of 14.3x [1] is a stark departure from its 10-year historical average of 41.17x [2], a 64% discount. This disconnect is even more pronounced when compared to its peers: the fintech sector’s average P/E is 18.7x, and the broader US Diversified Financial industry sits at 16.5x [1]. Meanwhile, the Price-to-Sales (P/S) ratio of 2.1x [1] and Price-to-Book (P/B) ratio of 3.34 [3] further underscore its affordability. Analysts have set a 12-month price target of $82.68, implying a 17.8% upside from its current level [1]. For a company generating $10.4 billion in annual revenue and expanding its transaction margin dollars [4], these multiples appear disconnected from reality.

Management Overhaul: A New Strategic Playbook

The leadership transition under CEO Alex Chriss has been a game-changer. Since taking the helm in September 2023, Chriss has prioritized profitability over growth-at-all-costs, cutting costs by 9% of the workforce and investing $300 million in technology modernization [5]. This includes launching PayPal World, a global interoperability platform linking major digital wallets like Mercado Pago and Tenpay Global, and PYUSD, a stablecoin designed to streamline cross-border transactions [6]. These moves position PayPal to capture a larger share of the $10 trillion global digital payments market, which is expanding at a 12% CAGR [7].

Fundamentals: Earnings Potential in the Midst of Skepticism

While Q3 2024 results disappointed investors—driven by softer branded volume growth amid US-China tariff concerns [8]—PayPal’s long-term trajectory remains intact. Venmo’s 20% revenue growth and a 7% rise in transaction margin dollars [4] demonstrate the company’s ability to monetize its ecosystem. Moreover, PayPal raised its 2025 profit target despite the headwinds [8], a move that signals confidence in its cost discipline and pricing power. The key question for skeptics is whether the market is overreacting to short-term macroeconomic noise or underestimating the company’s structural advantages.

Analyst Optimism vs. Market Doubts

The investment community is split. While Motley Fool analysts have labeled PayPal a “neutral” stock due to its high valuation [9], others see upside. TD Cowen recently raised its price target to $90, citing PayPal’s “improved operating leverage” [10], and RBC Capital Markets praised its “disciplined approach to profitability” [8]. On the other hand, Jefferies and BTIG remain cautious, emphasizing the need for stronger branded TPV growth [11]. This divergence creates an asymmetric risk-reward scenario: if PayPal executes its strategy, the current discount offers a margin of safety; if it falters, the risks are already priced in.

The Case for Accumulation

For value investors, the calculus is simple: PayPal’s valuation is unloved, its fundamentals are improving, and its strategic pivot toward global commerce and stablecoins is underappreciated. The upcoming February 25 Investor Day [12] will be a critical test, but the company’s recent earnings upgrades and analyst price targets suggest the worst may already be priced in. With a P/E ratio 30% below its fair value estimate [1] and a consensus target implying 17.8% upside, the risk-reward asymmetry is compelling.

Source:
[1]
PayPal Holdings, Inc. (PYPL) Valuation Measures & Financial
[2]
PYPL - PayPal Holdings PE ratio, current and historical
[3]
PayPal Holdings (PYPL) Statistics & Valuation
[4]
PayPal (NASDAQ:PYPL) Needs to Outperform Estimates
[5]
PayPal to lay off 9% of staff in 2024
[6]
Better Fintech Stock: Block vs. PayPal
[7]
PayPal (PYPL) Q2 2025 Earnings Call Transcript
[8]
PayPal lifts 2025 profit target; branded volume softness weighs on shares
[9]
PayPal Is Up 42% in 6 Months: Is It a Smart Stock to Buy for 2025 and Beyond?
[10]
PayPal stock target raised to $90 by TD Cowen
[11]
Jefferies maintains Hold rating on PayPal stock
[12]
BTIG maintains neutral PayPal stock rating amid growth concerns