PayPal Stock Trades Below Industry P/E: How to Play the Stock?

PayPal Holdings PYPL shares are trading cheap, as suggested by the Value Score of A. In terms of forward 12-month price-to-earnings (P/E), PayPal is currently trading at 8.29X, lower than the Zacks Financial Transaction Services industry average of 17.51X.

In comparison, peers like Visa V and Mastercard MA command richer valuations of 22.31X and 24.91X, respectively. The valuation gap highlights PayPal’s discounted positioning in the market, leading investors to question if it represents a compelling entry point.

However, valuation by itself doesn't ensure potential upside. PayPal faces macroeconomic headwinds and intense competition. Investors should evaluate how effectively the company addresses these hurdles, particularly through new product launches and ecosystem expansion. Connecting PayPal's core strengths to its discounted valuation is the best way to determine if the stock offers genuine long-term potential.

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PYPL shares have declined 26% in the past three months compared to the industry’s and the S&P 500 composite’s decline of 11.4% and 6.5%, respectively. Comparatively, its peers, Visa and Mastercard, declined less during this period.

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Earnings estimate revisions tell a more encouraging story. PayPal’s estimate revisions reflect a positive trend for full-year 2026. The Zacks Consensus Estimate for 2026 earnings is pegged at $5.34 per share, implying marginal growth over 2025. The upward revisions point to improving fundamentals that may not be fully reflected in today’s share price.

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Let’s delve deeper into this to find out how to play the stock.

PayPal’s Agentic Commerce Strategic Partnerships

PayPal is investing in AI-driven e-commerce via “agentic commerce,” where autonomous AI agents help consumers discover, compare and buy products. In January 2026, the company agreed to acquire Cymbio, a platform for multi-channel orchestration that enables brands to sell across agentic platforms and other e-commerce channels. The transaction is expected to close in the first half of 2026.

Similarly, PayPal teamed up with Microsoft to power the launch of Copilot Checkout in Copilot, partnered with OpenAI to enable seamless payments and agentic commerce experiences directly within ChatGPT and also joined forces with Perplexity to enable agentic commerce on the Perplexity Pro platform. With these partnerships, the company is delivering more scalable, secure and intelligent shopping experiences for merchants and consumers.

PayPal’s Emerging Digital Commerce Trends

PayPal is positioning itself at the forefront of emerging digital commerce trends through the expansion of dollar-backed stablecoin, PayPal USD (PYUSD). Last week, PayPal announced that it is making PYUSD available in 70 markets worldwide in the PayPal account, enabling users to send funds globally, with faster settlement and lower cost than traditional payment methods.

In early March, PayPal USD started engaging with TCS Blockchain, a provider of transportation trade finance, to scale solutions for trucking and transportation companies (carriers). This collaboration enables more carriers to settle freight invoices faster and at lower cost, using blockchain-based digital assets.

PayPal’s Venmo Drives Growth

Venmo is positioned as the preferred money movement platform for the young, affluent and digitally native consumers. Venmo’s user base is large and growing, with more than 100 million total active accounts. This week, Venmo announced a major expansion, extending its peer-to-peer payment experience to users worldwide. Venmo users can now send and receive money to/from hundreds of millions of PayPal users across 90 markets. This marks Venmo's largest market expansion ever since the app’s launch.

PayPal’s revenue composition has shifted as more consumers are using Venmo for everyday commerce. In 2025, Venmo revenue grew approximately 20% year over year to $1.7 billion. In the fourth quarter of 2025, Venmo registered its fifth consecutive quarter of double-digit growth, with Total Payment Volume (“TPV”) rising 13%. Its monthly active accounts reached 67 million, increasing 7% year over year. Moreover, Venmo launched Venmo Stash, an innovative rewards program designed to give customers more value that grows with every interaction. Venmo joined hands with Bilt to expand how people use Venmo for everyday payments.

Concerns to Note for PayPal

PayPal faces macroeconomic headwinds and operates in a highly competitive global payments industry. Its nature of business makes it vulnerable to foreign exchange fluctuations. The company also issued weaker-than-expected 2026 guidance, where TM$ is expected to decline slightly alongside an adjusted EPS range of a low single-digit decline to a slightly positive gain.

In the fourth quarter of 2025, PayPal’s online branded checkout TPV grew only 1% on a currency-neutral basis, down from 5% in the previous quarter. The company highlighted U.S. retail weakness, international headwinds like Germany macro softness, competition and slowdown in high-growth verticals leading to this de-growth. Management admitted its execution in the fourth quarter of 2025 has not met expectations, with slow speed and insufficient focus. This prompted a CEO change and appointment of Enrique Lores to bring greater discipline and accelerate execution.

How to Play the PYPL Stock?

PayPal's improving earnings outlook, strategic agentic commerce partnerships and Venmo’s growth provide for optimism in its recovery path. Despite the stock trading at a significant discount compared to its industry multiples and competitors, macroeconomic uncertainty, rising competition, weaker guidance and ongoing share underperformance doesn’t make it a compelling buying opportunity. At this stage, it seems to avoid the stock.

PayPal currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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