Should You Buy PayPal Stock on the Dip in May 2025?
The larger fintech landscape has been mixed in the face of macroeconomic volatility and increased competition. However, PayPal's concentration on achieving profitable growth through its branded checkout business is beginning to reap tangible benefits. Some analysts believe that the worst may be over for the payment technology behemoth.
About PayPal Stock
San Jose, California-based PayPal (PYPL) is a global leader in payments and e-commerce transaction processing, operating popular platforms such as PayPal Checkout and Venmo. With a market cap of around $65 billion, PayPal is also a significant player in the financial technology industry despite current competitive challenges.
PayPal stock has dropped about 5% in the last 12 months and is down nearly 25% in the year-to-date.
However, signs of a recovery are starting to emerge. Shares are up nearly 4% over the past five sessions and are trading more than 15% above their 52-week low.
The valuation is also attractive at the current levels. PayPal is trading at a forward price-earnings multiple of 13x and a price-sales multiple of 2x, both lower than its historical norms and those of peers in the fintech industry. An 11.6x price-to-cash flow ratio and return on equity of close to 24% reflect good underlying health and imply the stock may be undervalued compared with its profitability prospects.
PayPal Tops Q1 EPS Estimate, Maintains 2025 Guidance
PayPal posted Q1 2025 earnings of $1.33 per share, 15% higher than Wall Street's expectation of $1.16. Revenue was $7.8 billion, in line with expectations and higher by 1% compared to the same quarter of the previous year. It is worth mentioning that adjusted EPS increased 23% year-over-year, which is the fifth consecutive quarter of profitable growth since CEO Alex Chriss took over.
For the rest of 2025, PayPal upheld its earlier business outlook, which analysts read as a vote of confidence in the face of a complex macroeconomic environment. Improvement in profitability, particularly in its branded checkout and unbranded payment solutions, remains a focus of management.
Some of the key points during the quarter include 6% growth in branded checkout dollars (adjusted to remove leap-year impact), 20% growth in Venmo and more than 60% growth in debit card business. Transaction margin dollars, a measure of profitability, hit $3.7 billion and beat guidance, icnreasing faster than the growth in revenue and total payment volumes.
What Analysts Expect from PayPal Stock
Based on Barchart's Analyst Ratings snapshot, PayPal has a consensus 'Moderate Buy' recommendation. There are currently 44 analysts covering the stock, with 17 setting the stock to 'Strong Buy' and 22 to 'Hold.' The stock also has two 'Moderate Buy' ratings and three 'Strong Sell' ratings. This reflects the cautionary optimism surrounding the rebuilding of the company's momentum amid a competitive payments environment.
PYPL has a mean target price of $82.84, representing 28% upside potential here.
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