PayPal's Undervalued Growth Engine: Why PYPL is a Buy for 2026 and Beyond
55min readThe financial technology sector continues to evolve, but
, Inc. (PYPL) remains a key player poised to capitalize on digital payments growth. As we look ahead to 2026, a closer examination of analyst consensus, earnings momentum, and valuation metrics reveals a compelling opportunity for investors. Despite near-term headwinds, PayPal's fundamentals align with a robust growth trajectory, suggesting its current valuation offers a rare entry point for long-term gains.
Analyst Consensus: A Strong Buy Case Ignored by the Market
Analysts are increasingly bullish on PayPal's prospects. As of early 2025, 17 analysts rated PYPL a “Strong Buy,” while the average price target of $83.02 sits 16% above its current price of $71.48. Notable calls include Citigroup's $95 price target and RBC Capital's $88 estimate, reflecting confidence in PayPal's ability to navigate competitive pressures and scale its ecosystem.
Even the Zacks Rank #3 (Hold) rating, which often discourages short-term trades, should not deter long-term investors. The Hold stems from near-term macroeconomic uncertainties, such as trade tariffs and fintech competition, but the Zacks Momentum Style Score of “A” signals strong upward price momentum. This duality highlights a disconnect between short-term caution and the company's underlying strength.
Earnings Growth: A Catalyst for Revaluation
PayPal's Q1 2025 results underscore its resilience. Non-GAAP EPS surged to $1.33, a 15.65% beat over estimates and a 23.1% year-over-year jump. Revenue grew 2% forex-neutral to $7.79 billion, while total payment volume (TPV) rose 4% to $417.2 billion. These figures aren't just positive—they signal execution excellence in a challenging environment.
Looking ahead, 2026 EPS estimates project a 12.2% rise to $5.62, building on 2025's $5.08 consensus. Analysts have raised 2025 EPS estimates by 2% over the past 30 days, reflecting improving confidence. Crucially, PayPal's historical earnings surprise rate—an average 14% beat over the past four quarters—suggests the company is consistently overdelivering.
Historical backtests reveal that this pattern of outperformance has translated into tangible gains. Since 2020, a strategy of buying PYPL shares immediately after positive EPS surprises and holding for 20 trading days has averaged a 27.76% return, though with notable volatility—experiencing a maximum drawdown of -64.59% in extreme cases. While the elevated risk (Sharpe ratio of -0.26) underscores the need for disciplined risk management, the consistent beat-and-run dynamic highlights the stock's potential for rapid revaluation following earnings wins. This quantitative validation reinforces the argument that PayPal's earnings momentum is a key catalyst for outperformance.
Valuation: A Discounted Growth Leader
PayPal's stock trades at a forward P/E of 13.15x, sharply below the Zacks Financial Transaction Services industry average of 22.78x and far beneath Visa (28.79x) and Mastercard (33.07x). This valuation gap is stark, especially given PayPal's B-rated Zacks Value Score, which flags it as undervalued.
The disconnect between price and fundamentals is even more striking when considering PayPal's strategic moves. Investments in omnichannel commerce (e.g., NFC in Germany), Buy Now Pay Later (BNPL) expansion (20% volume growth in Q1), and partnerships (e.g., Coinbase's PYUSD stablecoin) are positioning PayPal to capture $417 billion in total addressable market growth by 2026. At current valuations, the stock is pricing in pessimism rather than potential.
Addressing Near-Term Risks: Why the Fundamentals Win
Critics point to trade tariff uncertainties and competition from Apple Pay and Adyen as risks. While valid, these concerns are already reflected in the stock's price. PayPal's diversified revenue streams—Venmo's 9.6% TPV growth, international expansion, and enterprise solutions—limit reliance on any single market.
Moreover, management's guidance for 2025 ($4.95–$5.10 EPS) is conservative, creating upside potential as macro conditions stabilize. The company's $6–7 billion free cash flow target further supports reinvestment in growth initiatives, not just dividends.
Conclusion: A Buy Signal for Long-Term Growth
PayPal's alignment of rising EPS estimates, strategic execution, and a deeply undervalued stock price creates a compelling buy case. The average analyst target of $83.02 implies 16% upside, while the Zacks Momentum Score of A signals a turning point for investor sentiment.
While short-term volatility may persist, the path to 2026 is clear: PayPal's ecosystem dominance, global expansion, and underappreciated financial strength position it to outperform. For investors seeking growth in a maturing fintech landscape, PYPL offers a rare combination of value and scalability. The time to act is now—before the market catches up.
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