PayPal PYPL shares have returned 35% in the trailing six-month period, outperforming the Zacks Computer and Technology sector’s return of 9.7% and the Zacks Internet Software industry’s appreciation of 34.2%.
PYPL’s portfolio strength has been helping it maintain deep and trusted relationships with merchants and consumers. Its two-sided platform helps develop direct financial relationships with customers and merchants.
Expanding clientele benefited total payment volume, which increased 9% year over year, both on a spot-rate basis and forex-neutral basis, to $422.641 billion in the third quarter of 2024.
PYPL Stock’s Performance
Zacks Investment Research
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PayPal saw year-over-year growth of 1% in total active accounts to 432 million, while payment transactions per active account were 61.4 million, up 9% year over year.
Transaction margin of $3.7 billion grew more than 8% on a reported basis and more than 6% ex-interest on customer balances, driven by higher interest income, branded checkout, Venmo, Braintree, and tech-led risk/loss improvements.
PYPL saw a 15% to 20% increase in Buy Now, Pay Later use in the reported quarter. The company’s strategy of faster deploying new product experiences like mobile checkout to more merchants is expected to drive traffic in 2025.
PayPal Shares Trade at a Discount
PYPL is one of the cheaper stocks in the industry, as suggested by the Value Score of B.
PYPL stock is trading at a significant discount with a forward 12-month P/E of 17.91X compared with the industry’s 38.64X.
PYPL’s P/E Ratio (F12M)
Zacks Investment Research
Image Source: Zacks Investment Research
PayPal shares are trading above the 50-day and 200-day moving averages, indicating a bullish trend.
PYPL Shares Trade Above 50-Day & 200-Day SMA
Zacks Investment Research
Image Source: Zacks Investment Research
PYPL Stock Rides on Strong Portfolio
A strong portfolio is a growth driver for PYPL. The unveiling of Fastlane, which enhances the guest checkout experience by allowing users to complete their purchase in one click, remains noteworthy. Since its August launch, more than 1,000 merchants have been using Fastlane to provide a seamless experience to their customers and drive increased conversion.
Fastlane is based on the company's decades of payment expertise to innovate and accelerate the guest checkout experience. In the United States, it is available to roughly 170 million eligible customers.
The launch of PayPal Complete Payments in new geographies, including China and Hong Kong, expands its footprint among small and medium-sized businesses (SMBs). PayPal expects to expand its service to more markets in 2025.
Expanding Partner Base Aids PYPL’s Prospects
PayPal’s expanding partner base, including Fiserv, Adyen, Amazon AMZN, Global Payments and Shopify SHOP, is driving prospects. The rich partner base is expected to help increase the adoption of PYPL’s Fastlane.
PayPal is now an additional processor for Shopify Payments in the United States. Its branded checkout solutions are now integrated into Shopify Payments. This creates a single and unified experience for business owners to drive operational efficiency.
PayPal’s partnership with Amazon now brings PayPal Checkout to SMBs offering Buy with Prime. In 2025, it will give Prime members the option to link their Amazon and PayPal accounts so that consumers can receive Prime shipping benefits when they use PayPal while shopping with Buy with Prime.
Its collaboration with Apple and Google to integrate the Venmo debit card with Apple Pay and Google Pay has been a noteworthy development. Since the launch of PayPal Everywhere, the company has added more than 1 million first-time debit card users. The company plans to expand the PayPal Everywhere service to Europe in 2025.
PayPal is a top payment method for advertisers and consumers globally across Meta Platforms’ META family of apps. Creators and developers are using Hyperwallet. META also uses Braintree for credit card processing.
PYPL’s Earnings Estimate Revisions Show Upward Trend
The Zacks Consensus Estimate for 2025 earnings is pegged at $4.91 per share, up by a penny over the past 30 days, suggesting 7.13% growth over 2024’s estimated figure of $4.58 per share.
The consensus mark for 2025 revenues is currently pegged at $33.07 billion, indicating 4.46% growth over 2024’s estimated figure of $31.66 billion.
PYPL’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 15.14%.
PayPal Holdings, Inc. Price and Consensus
PayPal Holdings, Inc. Price and Consensus
PayPal Holdings, Inc. price-consensus-chart | PayPal Holdings, Inc. Quote
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
What Should Investors Do With PYPL Shares?
PayPal’s robust portfolio, expanding partner base and cheap valuation are key drivers that make the stock attractive to long-term investors. Hence, investors who already own the stock may expect the company's growth prospects to be rewarding over the long term.
However, PYPL expects lower volume and revenue growth in the fourth quarter of 2024 and through 2025 from its Braintree products and services. Higher non-transaction operating expenses due to marketing spending are expected to hurt profits in the fourth quarter of 2024. Non-transaction operating expenses for 2024 are now expected to increase in the low-single-digit range. The trend is likely to continue in 2025.
We believe these factors will drag down PayPal shares in the near term.
PayPal currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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