PayPal Holdings (PYPL) stock is marching higher following the end of a highly contentious SEC probe. Since announcing the end of the SEC’s investigation at the start of May, PYPL stock has climbed ~30%. For PayPal, the end of the SEC’s probe removes a key regulatory overhang and paves the way for the leading tech platform to push deeper into blockchain-based payments and crypto. The company launched its branded stablecoin on the Ethereum network in 2023 as a dollar-pegged stablecoin backed by short-term U.S. Treasury bills.
Moreover, the good news on the regulator front coincided with the company’s latest Q1 earnings results, which also supported PayPal’s growth story, making me rather optimistic regarding PayPal’s prospects. I’m particularly pleased with the payment pioneer’s strategy to expand profitably, enhance the user experience, and monetize key platforms such as Venmo. Notably, PYPL is implementing so-called “agentic commerce” to sustain its growth trajectory and appease shareholders clamoring for revenue growth. As a result, I’m staying bullish.
PayPal Holdings (PYPL) price history over the past twelve months
Despite current concerns regarding the macroeconomy, management’s cautious but consistent guidance and potential upside shifts from government policy anticipated in 2026 provide a reassuring outlook. With a tempting valuation at about 14x non-GAAP earnings, PayPal appears undervalued.
Solid Fundamentals Support PayPal’s Recovery
PayPal reported strong Q1 2025 results, highlighting robust earnings even as revenue growth was subdued. Revenue increased a mere 1% year-over-year to $7.8 billion, but non-GAAP earnings per share surged 23%. And this was no coincidence, as PayPal consciously rebalanced its business model to focus on profitable transactions rather than volume growth. The benefit was evident in their operating margin, which increased by more than 250 basis points.
PayPal Holdings (PYPL) revenue, earnings and profit margin history
What was encouraging was PayPal’s smart choices in processing payments. While total payment transactions fell a bit, branded checkout transactions grew. Venmo also did well, with revenue growing 20%, driven largely by more users making purchases with debit cards and more merchants accepting Venmo as a form of payment. These metrics show that PayPal is growing strategically in areas that matter.
Why PayPal’s Conservative Outlook Is Amiable
Despite such strong results, PayPal was committed to conservative full-year guidance, projecting FY2025 adjusted EPS of $4.95 to $5.10. At first glance, that would seem cautious, but from my perspective, it’s astute. By establishing reasonable targets in an uncertain macro backdrop, PayPal is giving itself room to beat the numbers down the track. Should consumer spending and online payments pick up modestly, this guidance provides ample room for upside surprises.
PayPal’s valuation looks very attractive today. It’s trading at approximately 14x non-GAAP earnings, which is much less than many other fintech participants like Adyen (ADYYF), which is trading at over 50x. Given PayPal’s powerful brand, profitable growth, and steady share buybacks, I find it reasonable to expect its non-GAAP price-to-earnings ratio to increase to approximately 17.5 by mid-2026.
The company is also on track to achieve a trailing 12-month non-GAAP earnings per share of ~$5.25 for mid-2026. This situation would easily take PayPal’s share price to around $90 in the next 12 months, a reasonable ~10% increase from its current position.
Massive Economic Benefits Are on the Horizon
On the macro front, I think that by 2026, strong positive economic trends could emerge thanks to the Trump government’s and Treasury Secretary Scott Bessent’s pro-growth policies. Their plan includes tax cuts, reducing red tape, and good trade policies, which could substantially accelerate U.S. economic activity, consumer spending, and business investment. For PayPal, this could mean increased transactions as consumers and businesses spend more online and offline.
U.S. Treasury Secretary Scott Bessent
A very likely outcome is that interest rates will fall as inflation moderates, making consumers spend more. Reduced interest rates could also make investors more optimistic and push stock market prices higher, indirectly helping PayPal stock. Bessent believes interest rates will decrease naturally as the economy improves, paving the way for good market performance. Although some near-term problems may emerge in the international trade talks, PayPal’s bullish medium-term outlook remains intact.
PYPL’s Multifactorial Growth Catalysts
PayPal is fueling future earnings growth through key strategic initiatives such as Fastlane checkout, Venmo monetization, and AI-driven commerce. Fastlane, designed to support small and mid-sized businesses, has scaled quickly and now accounts for roughly 50% of SMB checkout volume. In Q1, Fastlane merchants saw improved conversion rates and a 33% increase in product adoption, significantly boosting transaction margins.
Venmo monetization also accelerated in Q1, with revenue rising 20% year-over-year. This growth was propelled by increased debit card spending—monthly active users grew by about 40%—and broader merchant acceptance. “Pay with Venmo” volume surged over 50%, highlighting the platform’s growing potential. As monetization deepens, Venmo could generate millions of dollars in annual revenue.
Also, PayPal’s initial move into AI-powered agentic commerce—AI agents making payments independently using PayPal’s application programming interfaces—positions the company for long-term profitability in the $17 trillion autonomous transaction market by 2030. PayPal’s repositioning toward profitable transactions differentiates it from competitors like Adyen, which remains focused on volume, and Stripe, which focuses on the breadth of its platform. This disciplined effort drove Q1 non-GAAP operating margin to 20.7%, positioning it for ongoing earnings growth and potential valuation expansion.
Is PayPal a Buy, Sell, or Hold?
On Wall Street, PayPal is a Moderate Buy. This consensus rating is based on 15 Buys, 16 Holds, and two Sell ratings obtained over the past three months. The average PYPL price target is $82.18, indicating ~13% upside potential over the next 12 months. This reaffirms that my $90 target is conservative and well within reach.
The resolution of the SEC probe has removed a significant obstacle for PayPal, allowing the company to refocus on what it does best, particularly in blockchain and crypto. Just like online payments came to town in the late 1990s and PayPal took courageous steps to dominate, so too today. PayPal intends to carve out a strong position in the cryptosphere. Coupled with strong Q1 earnings and strategic initiatives like Venmo monetization and agentic commerce, PayPal is well-positioned for continued expansion. With these positive developments, the outlook remains bullish.
To support the bullish projection, PayPal’s Q1 2025 performance makes me confident about the company’s trajectory. Its tightly managed finance, carefully considered product initiatives, and cautious yet opportunistic guidance offer tremendous upside potential.
With economic conditions likely improving through shrewd government policy by 2026, PayPal is well-positioned to recover strongly, aided by better consumer confidence and increased spending. I consider PayPal a good buy for investors seeking to achieve market-beating gains over the coming 12 months and beyond.
