Leading digital payment company PayPal’s (PYPL) shares are gradually recovering after the bloodbath following its Q4 earnings report on February 3rd. Despite delivering a strong performance across the board and offering solid guidance for 2025, shares plunged 10%.
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PayPal Holdings (PYPL) Price and Analysis over the past 5 days including Smart Score
First coined by Warren Buffett and often said during the trading day: “Be fearful when others are greedy, and greedy when others are fearful”.
In my view, PayPal stock is currently in correction territory, so it presents a compelling buying opportunity. I remain bullish on the stock, as I believe the market’s reaction was overly harsh—punishing PayPal too harshly over concerns about competition in branded checkouts rather than focusing on the bigger picture.
Wall St. analysts fear PYPL’s future for the wrong reasons, which means now may be the time to buckle up and capitalize.
Overall, PayPal delivered very solid earnings numbers, including a beat across the board, making it even more surprising to see such a bearish reaction post-earnings.
The string of beats starts with revenue, where the company reported $8.37 billion, showing 4.2% year-over-year growth, topping estimates by 1.2%. EPS came in at $1.12, beating estimates by $0.07. Next, the total payment volume of $437.8 billion grew 6.8% year-over-year, slightly beating estimates by 0.3%. Additionally, a transaction margin of 45.8% came in above guidance by 120 bps. To end the string of beats, free cash flow came in at $2.1 billion, beating quarterly guidance by 53%.
PayPal Holdings (PYPL) Earnings, Revenues Date & History
Other highlights included a new $15 billion buyback authorization, representing 17% of the company’s market cap, and an expected ~$6 billion share repurchase in FY2025. As for the 2025 guidance, the figures aligned mainly with Wall Street expectations, with PayPal forecasting transaction margin growth between 4% and 5% and non-GAAP EPS growth in the 6% to 10% range. Perhaps the main blemish was the free cash flow guidance, which came in at $6.5 billion, lower than the $6.8 billion reported in 2024.
Overall, these projections are far from terrible and scarcely warrant a 13% beating in a single day.
If the complete picture of PayPal’s Q4 financial metrics appears to have been highly bullish, the branded check-outs metric can explain much of the super post-earnings bearish reaction—which even marked the worst trading day for PayPal stock since 2022.
As pointed out by one of PayPal’s bulls, Mizuho analyst Dan Dolev, the bearish case for PayPal is that the company is losing market share to Apple’s (AAPL) Apple Pay, given the ease of use and integration with Apple’s iOS ecosystem. According to Dolev, investors thought that PayPal could accelerate the branded checkout button, but the 6% annual growth came in only 1% higher than the same quarter last year. PayPal’s management team partly blamed softness in Europe, though, in the U.S., branded checkout numbers showed some decent growth in Q4. Also disappointing was the lack of perspective that this could change in 2025, as PayPal’s CFO Jamie Miller guided that “expect branded checkout TPV to grow about mid-single digits and to have consistent growth from last year.”
While branded checkout growth rates may not be what investors were hoping for, and many likely wanted more clarity on how PayPal plans to address its market share losses, this doesn’t seem like a structural issue.
As BTIG analyst Andrew Hart points out, the bearish reaction to PayPal’s stock is largely due to high expectations. I agree with this view, especially since PayPal has shifted its strategy in recent years from focusing on growth to prioritizing value—and not all investors are on board with that. A good example of this shift is PayPal’s increased focus on profitability through acquisitions like Venmo and Braintree, allowing the company to expand its services, reduce operating costs, and scale more efficiently.
After the Q4 earnings sell-off, PayPal trades at valuation multiples, for which I believe a bullish stance is highly warranted.
From a cash flow perspective, the guidance for 2025 suggests free cash flow generation of between $6 billion and $7 billion, plus the $6 billion share repurchase program planned for 2025, translating to $6-7 of free cash flow per share considering PayPal trading at $78 share price. This would put PayPal’s valuation at 11x to 13x forward free cash flow—about 50% below its historical average over the past five years and 28% lower than the industry average.
In other words, valuations seem quite de-risked to me for a company increasingly focused on accumulating value.
Following PayPal’s Q4 earnings, analysts on Wall Street are somewhat divided, with 15 out of 27 analysts recommending a Buy and 12 rating the stock as a Hold. Not a single analyst recommends a Sell, as the stock remains depressed since PYPL’s Q4 report earlier this week.
Despite the double-digit post-earnings drop in shares, there were no downgrades, but four analysts lowered their price targets while two raised theirs. As a result, the average price target now is $97 per share, implying a potential upside of ~23% from the current share price.
PayPal Holdings (PYPL) stock forecast for the next 12 months including a high, average, and low price target
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PayPal’s earnings report was far from pessimistic, and yet, the share price tumbled. The company published an earnings report that, in theory, should’ve left the share price undisturbed. The market focused on some blemishes, driven by specific bearish narratives such as competition in branded checkout with Apple Pay, which some think could overshadow the positive results for the quarter.
With the dust now settled, it appears investors and several Wall St. analysts overreacted. At current valuation multiples, investors who buy the dip will likely add a strong value pick to their portfolios at a significant discount.
