PYPL Stock: PayPal is Reinventing Itself

PayPal [PYPL] has morphed from a pure payments processor into what CEO Alex Chriss describes as a “dynamic commerce platform”.

Originally founded in the late 1990s, it was acquired by eBay in 2002, then spun off in 2015. Today it powers payments, checkout, consumer credit and wallet services across digital and in-store commerce. 

At present, PayPal is aggressively pushing branded checkout, artificial intelligence-based (AI) shopping integration via its Honey product, and international expansion. It recently struck a $7bn receivables buyout deal with Blue Owl [OWL] for its US “Pay in 4” buy now, pay later (BNPL) portfolio, and launched “PayPal World” for cross-border payments, integrating local rails like India’s Unified Payments Interface. Additionally, a new multiyear AI partnership with Alphabet’s [GOOGL] Google seeks to embed PayPal services within Google’s products.

Q2 Earnings

In Q2 2025, PayPal delivered a solid performance that exceeded expectations. 

Net revenues rose roughly 5% year over year to about $8.29bn, while total payment volume grew 6% to $443.5bn. 

The company’s transaction margin dollars climbed 7%, underscoring improved core profitability. GAAP operating income increased 14% to $1.5bn, and non-GAAP operating income reached $1.64bn, pushing operating margins to 18.1% and 19.8%, respectively. 

EPS came in at $1.29 GAAP and $1.40 non-GAAP, topping consensus. Active accounts rose 2% to 438 million, and quarterly free cash flow stood at $700m. PayPal also returned $1.5bn to shareholders via buybacks during the quarter.

Beyond the numbers, PayPal is doubling down on higher-margin growth levers: branded checkout adoption is rising, Venmo revenue jumped 20% and loan receivables from its BNPL products grew sequentially. 

On the earnings call, CEO Chriss noted that PayPal had a strong quarter, “delivering profitable growth and building momentum in transforming PayPal from a payments company into a dynamic commerce platform. Fintech is in its infancy, and we believe the next five years are likely to see more change in how people shop than the last two decades combined.”

Making Payments Pay: PYPL vs XYZ vs ADYEY

Fintech may be in its infancy, but PayPal faces some very mature competition. 

Block [XYZ], formerly known as Square, is a US-based financial services company founded by Jack Dorsey. It operates through two primary segments: Square, a point-of-sale system for merchants, and Cash App, a peer-to-peer payment platform. 

In Q2 2025, Block reported a 14% year-over-year increase in gross profit, totaling $2.54bn. Square’s gross profit grew 11% to $1.03bn, while Cash App’s gross profit rose 16% to $1.5bn. Despite these gains, revenue declined by 1.7% to $6.05bn, missing analyst expectations, and adjusted earnings per share were $0.62, above estimates but down 33.3% year-over-year. The company raised its full-year gross profit forecast to $10.17bn and adjusted operating income to $2.03bn. 

Block was recently added to the S&P 500, effective July 23, 2025.

Another firm in the space is Adyen [ADYEY], a Netherlands-based global payments platform that offers end-to-end payment solutions for businesses. 

In H1 2025, Adyen reported net revenue of €1.09bn, a 20% increase year-over-year. Processed volume reached €649bn, up 5% year-over-year, with a 23% increase excluding a single large-volume customer. EBITDA grew 28% to €543.7m, resulting in an EBITDA margin of 50%. 

The company also achieved a free cash flow conversion ratio of 87%. 

Despite these strong results, Adyen revised its annual net revenue growth outlook downward due to external pressures, including US tariffs and a weaker dollar. The company anticipates a slight acceleration in revenue growth in 2025, with further expansion in EBITDA margin.

Source: Yahoo Finance

As of the October 1 close PYPL stock is trading at $66.90 per share, XYZ stock at $73.40 and ADYEY stock at $16.03. PayPal’s P/S ratio is 2.09, indicating a moderate valuation relative to its revenue. Block’s P/S ratio is around 1.95, suggesting it is comparatively undervalued. Adyen’s P/S ratio is about 17.37, reflecting its premium valuation in the global payments sector.

In terms of profitability, PayPal’s operating margin stands at 19.29%, Block’s at 8.18% and Adyen’s at 44.43%, highlighting Adyen’s superior efficiency. However, PayPal’s established market presence and diversified services provide a stable revenue base. Block’s inclusion in the S&P 500 and its focus on cryptocurrency integration may offer future growth opportunities, while Adyen’s global reach and strong financial performance position it as a formidable competitor in the payments industry.

PYPL stock holds a consensus ‘hold’ rating from 42 analysts, with an average 12-month price target of $82.87, ranging from a low of $62 to a high of $120. Analysts have noted that the stock could be undervalued by approximately 20%, based on management’s free cash flow guidance and average free cash flow yield metrics. 

PYPL Stock: The Investment Case

The Bull Case for PayPal

PayPal’s scale and brand recognition give it a strong moat in digital payments. Growth drivers include Venmo, international expansion, branded checkout and BNPL offerings. Recent Q2 results showed revenue growth, rising transaction margins and expanding active accounts. Strategic partnerships, AI-driven tools and integration with e-commerce platforms enhance user engagement. Its balance sheet allows share buybacks and M&A flexibility. Continued adoption of digital wallets and cross-border payments, combined with operational efficiency improvements, could drive margin expansion and multiple re-rating, positioning PayPal to capture long-term fintech growth opportunities. 

The Bear Case for PayPal

PayPal faces ongoing challenges from competition, including Block, Adyen and emerging fintechs, which may pressure transaction volumes and margins. Regulatory scrutiny and potential antitrust concerns in key markets could limit growth. Its “Pay in 4” BNPL segment carries credit risk, particularly if consumer defaults rise in a slowing economy. International expansion exposes the company to FX volatility and local payment regulations. Platform outages or cybersecurity incidents could hurt reputation and adoption. Despite a solid balance sheet, slowing growth in mature markets and rising operational costs could constrain free cash flow and reduce investor confidence. 

Conclusion

PayPal balances substantial growth opportunities with notable risks. Its scale, brand and diversified payment ecosystem support long-term expansion, while competition, regulatory pressure and credit exposure remain key challenges.