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PayPal Stock Trades at Discount Valuation: How to Play the Stock
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Key Takeaways
PayPal trades at 8.22X forward earnings, well below industry peers Visa and Mastercard.
PYPL grew Q1 TPV 11% to $464B as Venmo posted a sixth straight quarter of double-digit growth.
PayPal expanded Venmo globally and launched AI-commerce partnerships with Microsoft and OpenAI.
PayPal Holdings (PYPL - Free Report) 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 8.18X, lower than the Zacks Financial Transaction Services industry average of 16.20X.
In comparison, peers like Visa (V - Free Report) and Mastercard (MA - Free Report) command richer valuations of 22.66X and 23.69X, 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.
Image Source: Zacks Investment Research
PYPL shares have gained 11.9% in the past three months against the industry’s decline of 7.2%, while the S&P 500 composite claimed 10.8%. Comparatively, among its peers, Visa has gained 4.5% while Mastercard has declined 3.6% during this period.
Image Source: Zacks Investment Research
Earnings estimate revisions tell a different story. PayPal’s estimate revisions reflect a unfavorable trend for full-year 2026. The Zacks Consensus Estimate for 2026 earnings is pegged at $5.30 per share, implying a marginal decline over 2025.
Image Source: Zacks Investment Research
Let’s delve deeper into this to find out how to play the stock.
Key Highlights of PYPL’s Q1 Earnings Release
On paper, PayPal reported solid growth in the first quarter of 2026. The company’s net revenues came in at $8.35 billion, rising 7.2% year over year. Total Payment Volume (“TPV”) climbed 11% to $464 billion. Transaction margin dollars (“TM$”) increased 3% to $3.81 billion from the year-ago quarter. Total active accounts increased 1% year over year to 439 million. Online branded checkout volume growth improved slightly compared to last quarter, up 2% on a currency-neutral basis.
However, non-GAAP operating income decreased 4.6% to $1.54 billion, and operating margin fell 229 basis points to 18.4% year over year. Non-transaction related expenses rose 8% to $2.27 billion, underscoring increased spending tied to technology and growth initiatives.
PayPal’s Digital Commerce Initiatives & Partnerships
This week, PayPal announced a new global goal to support 25 million people and small businesses with the resources, skills and training they need to thrive in the digital economy. The goal is outlined in PayPal's 2025 Global Impact Report and reflects the company's continued focus on expanding economic opportunity and helping entrepreneurs thrive in a rapidly evolving world. This initiative could broaden PayPal's user base and transaction volume over time while strengthening brand loyalty.
PayPal has signed a multi-year partnership with the Seattle Seahawks this week to become the team’s Official Fan-to-Fan Payments and exclusive digital ticket payment processing partner, marking PayPal’s first individual NFL club partnership. The partnership integrates PayPal into Ticketmaster for seamless season-ticket checkout and makes PayPal the presenting partner of the “Seahawks Gameday Experience Program,” giving fans perks like field passes, on-field player introductions and even postgame press conferences.
PayPal is investing in AI-driven e-commerce via “agentic commerce,” where autonomous AI agents help consumers discover, compare and buy products. The company teamed up with Microsoft (Copilot Checkout), OpenAI (ChatGPT) and Perplexity (Perplexity Pro platform) to deliver more scalable, secure and intelligent shopping experiences for merchants and consumers.
PayPal is also making dollar-backed stablecoin, PayPal USD, 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.
PayPal’s Venmo Drives Growth
Venmo is positioned as the preferred money movement platform for the young, affluent and digitally native consumers. PayPal’s revenue composition has shifted as more consumers are using Venmo for everyday commerce. Venmo TPV continues to reach new highs in the first quarter of 2026, accelerating sequentially to 14% growth year over year. This marks the sixth consecutive quarter of double-digit growth.
Venmo’s user base is large and growing, with more than 100 million total active accounts. In March 2026, Venmo announced its biggest push yet, rolling out peer-to-peer payments to users worldwide. Now, Venmo app users can seamlessly send and receive funds with hundreds of millions of PayPal customers in 90 markets. This marks Venmo's largest market expansion ever since the app’s launch.
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.
In the second quarter of 2026, the company expects low single-digit revenue growth on a currency-neutral basis, a low single-digit or approximately 3% decline in TM$, a decline of low single digits in TM$ excluding interest and a decline of high single digits or approximately 9% in non-GAAP EPS.
The company reiterated 2026 guidance, where TM$ is expected to decline slightly. Non-GAAP EPS to range from a low-single digit decline to slightly positive. Management expects to generate more than $6 billion of adjusted free cash flow, and projects share repurchases to be $6 billion in 2026.
How to Play the PYPL Stock?
PayPal's solid first-quarter results, strategic initiatives and partnerships, and Venmo’s growth provide for optimism in its recovery path. Despite rising competition, macroeconomic uncertainty, weaker guidance and downward revision of consensus mark, the stock is outperforming peers and trading at a significant discount compared to its industry multiples. This makes the stock better to hold.
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PayPal Stock Trades at Discount Valuation: How to Play the Stock
Key Takeaways
PayPal Holdings (PYPL - Free Report) 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 8.18X, lower than the Zacks Financial Transaction Services industry average of 16.20X.
In comparison, peers like Visa (V - Free Report) and Mastercard (MA - Free Report) command richer valuations of 22.66X and 23.69X, 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.
Image Source: Zacks Investment Research
PYPL shares have gained 11.9% in the past three months against the industry’s decline of 7.2%, while the S&P 500 composite claimed 10.8%. Comparatively, among its peers, Visa has gained 4.5% while Mastercard has declined 3.6% during this period.
Image Source: Zacks Investment Research
Earnings estimate revisions tell a different story. PayPal’s estimate revisions reflect a unfavorable trend for full-year 2026. The Zacks Consensus Estimate for 2026 earnings is pegged at $5.30 per share, implying a marginal decline over 2025.
Image Source: Zacks Investment Research
Let’s delve deeper into this to find out how to play the stock.
Key Highlights of PYPL’s Q1 Earnings Release
On paper, PayPal reported solid growth in the first quarter of 2026. The company’s net revenues came in at $8.35 billion, rising 7.2% year over year. Total Payment Volume (“TPV”) climbed 11% to $464 billion. Transaction margin dollars (“TM$”) increased 3% to $3.81 billion from the year-ago quarter. Total active accounts increased 1% year over year to 439 million. Online branded checkout volume growth improved slightly compared to last quarter, up 2% on a currency-neutral basis.
However, non-GAAP operating income decreased 4.6% to $1.54 billion, and operating margin fell 229 basis points to 18.4% year over year. Non-transaction related expenses rose 8% to $2.27 billion, underscoring increased spending tied to technology and growth initiatives.
PayPal’s Digital Commerce Initiatives & Partnerships
This week, PayPal announced a new global goal to support 25 million people and small businesses with the resources, skills and training they need to thrive in the digital economy. The goal is outlined in PayPal's 2025 Global Impact Report and reflects the company's continued focus on expanding economic opportunity and helping entrepreneurs thrive in a rapidly evolving world. This initiative could broaden PayPal's user base and transaction volume over time while strengthening brand loyalty.
PayPal has signed a multi-year partnership with the Seattle Seahawks this week to become the team’s Official Fan-to-Fan Payments and exclusive digital ticket payment processing partner, marking PayPal’s first individual NFL club partnership. The partnership integrates PayPal into Ticketmaster for seamless season-ticket checkout and makes PayPal the presenting partner of the “Seahawks Gameday Experience Program,” giving fans perks like field passes, on-field player introductions and even postgame press conferences.
PayPal is investing in AI-driven e-commerce via “agentic commerce,” where autonomous AI agents help consumers discover, compare and buy products. The company teamed up with Microsoft (Copilot Checkout), OpenAI (ChatGPT) and Perplexity (Perplexity Pro platform) to deliver more scalable, secure and intelligent shopping experiences for merchants and consumers.
PayPal is also making dollar-backed stablecoin, PayPal USD, 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.
PayPal’s Venmo Drives Growth
Venmo is positioned as the preferred money movement platform for the young, affluent and digitally native consumers. PayPal’s revenue composition has shifted as more consumers are using Venmo for everyday commerce. Venmo TPV continues to reach new highs in the first quarter of 2026, accelerating sequentially to 14% growth year over year. This marks the sixth consecutive quarter of double-digit growth.
Venmo’s user base is large and growing, with more than 100 million total active accounts. In March 2026, Venmo announced its biggest push yet, rolling out peer-to-peer payments to users worldwide. Now, Venmo app users can seamlessly send and receive funds with hundreds of millions of PayPal customers in 90 markets. This marks Venmo's largest market expansion ever since the app’s launch.
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.
In the second quarter of 2026, the company expects low single-digit revenue growth on a currency-neutral basis, a low single-digit or approximately 3% decline in TM$, a decline of low single digits in TM$ excluding interest and a decline of high single digits or approximately 9% in non-GAAP EPS.
The company reiterated 2026 guidance, where TM$ is expected to decline slightly. Non-GAAP EPS to range from a low-single digit decline to slightly positive. Management expects to generate more than $6 billion of adjusted free cash flow, and projects share repurchases to be $6 billion in 2026.
How to Play the PYPL Stock?
PayPal's solid first-quarter results, strategic initiatives and partnerships, and Venmo’s growth provide for optimism in its recovery path. Despite rising competition, macroeconomic uncertainty, weaker guidance and downward revision of consensus mark, the stock is outperforming peers and trading at a significant discount compared to its industry multiples. This makes the stock better to hold.
PayPal currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.