PayPal's Financial Weakness Leads to Significant Stock Decline
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 33 minutes ago
0mins
Source: Fool
- User Account Growth Slows: PayPal currently boasts 439 million active accounts, and while total payment volume reached $464 billion in Q1, the sluggish growth compared to last year indicates increasing market competition pressures.
- Financial Performance Declines: The adjusted operating margin fell to 18.4% in Q1 from 20.7% a year ago, with adjusted operating income decreasing by 5% year-over-year to $1.5 billion, reflecting a weakening profitability.
- Investor Sentiment Deteriorates: Since the earnings report on May 5, PayPal's stock has dropped 12%, as the market reacted negatively to only 2% growth in online branded checkout, raising concerns about the company's future growth prospects.
- Valuation Attractiveness Diminishes: Although PayPal's forward price-to-earnings ratio stands at 8.4, significantly lower than the S&P 500's 22.2, analysts remain cautious about its future performance due to intensified competition and slower growth, advising existing shareholders to hold their positions.
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Analyst Views on PYPL
Wall Street analysts forecast PYPL stock price to rise
29 Analyst Rating
6 Buy
19 Hold
4 Sell
Hold
Current: 44.300
Low
51.00
Averages
72.86
High
100.00
Current: 44.300
Low
51.00
Averages
72.86
High
100.00
About PYPL
PayPal Holdings, Inc. offers a technology platform. The Company’s products are designed to enable digital payments and simplify commerce experiences for consumers and merchants to make selling, shopping, and sending and receiving money simple, personalized, and secure, online or offline, including mobile. It provides consumers with a digital wallet that enables them to send payments to merchants securely using a variety of funding sources, which include a bank account, a PayPal or Venmo account balance, its consumer credit products, a credit card, a debit card, certain cryptocurrencies, or other stored value products. It operates a global, two-sided network at scale that connects consumers and merchants with 434 million active accounts across approximately 200 markets. Its brands include PayPal, Braintree, Venmo, Xoom, Hyperwallet, PayPal Zettle, PayPal Honey, and Paidy. It offers financing products through the PayPal Working Capital (PPWC) and PayPal Business Loan (PPBL).
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
PayPal Reports Weak 2% Growth in Q1 2026
- Weak Growth Performance: PayPal's total payment volume (TPV) grew only 2% in Q1 2026, a slight improvement from 1% in Q4 2025, but market concerns over competitive pressures led to a 12% drop in stock price post-report.
- Declining Profitability: The company's adjusted operating margin fell from 20.7% a year ago to 18.4%, with adjusted operating income down 5% year-over-year to $1.5 billion, indicating pressure on profitability as the CEO focuses on heavy investments to enhance technological infrastructure.
- Attractive Valuation: With a forward price-to-earnings ratio of 8.4, significantly lower than the S&P 500's 22.2, PayPal appears undervalued; however, in a highly competitive market, investors should be cautious as it may not be a smart buy at this time.
- Hold Recommendation: Analysts suggest existing shareholders hold onto the stock, as its low valuation may protect against downside risks, and investors facing significant losses might choose to remain patient rather than sell hastily.
See More
PayPal's Financial Weakness Leads to Significant Stock Decline
- User Account Growth Slows: PayPal currently boasts 439 million active accounts, and while total payment volume reached $464 billion in Q1, the sluggish growth compared to last year indicates increasing market competition pressures.
- Financial Performance Declines: The adjusted operating margin fell to 18.4% in Q1 from 20.7% a year ago, with adjusted operating income decreasing by 5% year-over-year to $1.5 billion, reflecting a weakening profitability.
- Investor Sentiment Deteriorates: Since the earnings report on May 5, PayPal's stock has dropped 12%, as the market reacted negatively to only 2% growth in online branded checkout, raising concerns about the company's future growth prospects.
- Valuation Attractiveness Diminishes: Although PayPal's forward price-to-earnings ratio stands at 8.4, significantly lower than the S&P 500's 22.2, analysts remain cautious about its future performance due to intensified competition and slower growth, advising existing shareholders to hold their positions.
See More
Analysis of PayPal's Stock Market Outlook
- Market Recovery: Following a poor post-pandemic performance, a small number of investors, including notable figures like Michael Burry, are turning bullish on PayPal, especially as its current price is less than 10 times the expected per-share profit, indicating market optimism about its future.
- Weak Revenue Growth: Although PayPal's first-quarter revenue improved by 7%, analysts expect single-digit revenue growth for this year and next, reflecting limited growth potential in mature markets, with earnings guidance suggesting a slight profit decline.
- Increased Competitive Pressure: PayPal faces significant competition from platforms like Apple Pay and Block's Cash App, which are well-positioned in consumers' minds, with projections indicating Apple Pay's user base will grow from 65.6 million to 84 million, outpacing PayPal's recent user growth.
- Lackluster Long-Term Outlook: Morningstar forecasts that PayPal's annual revenue will rise from $33.2 billion last year to $41.1 billion by 2030, with an annualized growth rate just above 4%, which barely keeps pace with inflation, leading investors to remain cautious about future valuation increases.
See More
Analysis of Stocks Under $50
- Redwire Stock Risks: Redwire (NYSE:RDW) is currently priced at $15.14, and its historically negative EPS raises concerns for conservative investors, while a 14 percentage point decline in free cash flow margin over the past five years indicates increased investments to maintain market position, potentially leading to liquidity issues and the need for additional equity financing that could dilute shareholder value.
- PayPal's Growth Struggles: PayPal (NASDAQ:PYPL) is trading at $44.35, with only 5.3% annual sales growth over the past two years, significantly lagging behind peers, and its 2.8% annual EPS growth has not kept pace with revenue gains, suggesting difficulties in generating incremental demand from its large revenue base, warranting caution from investors.
- Crescent Energy Investment Opportunity: Crescent Energy (NYSE:CRGY) is priced at $13.11, boasting an impressive 41.5% annual revenue growth over the past five years, reflecting significant market share gains, and its superior unit economics yield a gross margin of 59%, making it a free cash flow powerhouse with the flexibility to invest in growth or return capital to shareholders.
- Market Dynamics Observation: In the current market environment, investors should focus on stocks that not only possess high-quality businesses but also pay attention to their recent market movements to seize potential investment opportunities, with StockStory's list of strong momentum stocks being particularly noteworthy.
See More
Investment Comparison: PayPal vs. Visa
- PayPal's User Growth Struggles: PayPal's active accounts grew from 426 million in 2021 to only 439 million by 2025, falling short of its 750 million target, resulting in an over 80% stock price drop over five years, highlighting severe growth potential issues.
- Revenue Growth Slowdown: Although PayPal's revenue grew at a 7% CAGR from 2021 to 2025, its transaction take rates continued to decline, and intensified competition has put significant pressure on its overall profitability.
- Visa's Steady Growth: Visa's revenue and EPS grew at CAGRs of 14% and 16% from 2021 to 2025, showcasing the advantages of its asset-light business model, which allows rapid expansion into new markets while maintaining high margins.
- Diverging Future Outlooks: Analysts expect PayPal's revenue and EPS to grow at CAGRs of only 4% and 5% from 2025 to 2028, compared to Visa's projected 11% and 18%, indicating a stronger growth potential for Visa in the future.
See More
PayPal Reports Mixed Q1 Results Under New CEO Lores
- Revenue Growth: PayPal's Q1 revenue reached $8.4 billion, marking a 7% year-over-year increase; however, operating margins fell sharply from 20.7% to 18.4%, indicating challenges during the company's transition.
- Cash Flow Guidance: Management reaffirmed a full-year adjusted free cash flow target of at least $6 billion, yet the Q2 outlook triggered a sell-off, reflecting investor concerns about the company's transformation.
- Cost Savings Target: PayPal aims to achieve at least $1.5 billion in cost savings over the next two to three years through organizational simplification and AI adoption, which is intended to enhance operational efficiency and competitiveness.
- Decline in User Accounts: The total user accounts decreased to 439 million, with transaction take rates compressing to 1.62%, raising concerns about the company's competitive positioning, especially as Q2 guidance indicates weak revenue and transaction margin growth.
See More
PayPal Reports Weak 2% Growth in Q1 2026
- Weak Growth Performance: PayPal's total payment volume (TPV) grew only 2% in Q1 2026, a slight improvement from 1% in Q4 2025, but market concerns over competitive pressures led to a 12% drop in stock price post-report.
- Declining Profitability: The company's adjusted operating margin fell from 20.7% a year ago to 18.4%, with adjusted operating income down 5% year-over-year to $1.5 billion, indicating pressure on profitability as the CEO focuses on heavy investments to enhance technological infrastructure.
- Attractive Valuation: With a forward price-to-earnings ratio of 8.4, significantly lower than the S&P 500's 22.2, PayPal appears undervalued; however, in a highly competitive market, investors should be cautious as it may not be a smart buy at this time.
- Hold Recommendation: Analysts suggest existing shareholders hold onto the stock, as its low valuation may protect against downside risks, and investors facing significant losses might choose to remain patient rather than sell hastily.
See More
PayPal's Financial Weakness Leads to Significant Stock Decline
- User Account Growth Slows: PayPal currently boasts 439 million active accounts, and while total payment volume reached $464 billion in Q1, the sluggish growth compared to last year indicates increasing market competition pressures.
- Financial Performance Declines: The adjusted operating margin fell to 18.4% in Q1 from 20.7% a year ago, with adjusted operating income decreasing by 5% year-over-year to $1.5 billion, reflecting a weakening profitability.
- Investor Sentiment Deteriorates: Since the earnings report on May 5, PayPal's stock has dropped 12%, as the market reacted negatively to only 2% growth in online branded checkout, raising concerns about the company's future growth prospects.
- Valuation Attractiveness Diminishes: Although PayPal's forward price-to-earnings ratio stands at 8.4, significantly lower than the S&P 500's 22.2, analysts remain cautious about its future performance due to intensified competition and slower growth, advising existing shareholders to hold their positions.
See More
Analysis of PayPal's Stock Market Outlook
- Market Recovery: Following a poor post-pandemic performance, a small number of investors, including notable figures like Michael Burry, are turning bullish on PayPal, especially as its current price is less than 10 times the expected per-share profit, indicating market optimism about its future.
- Weak Revenue Growth: Although PayPal's first-quarter revenue improved by 7%, analysts expect single-digit revenue growth for this year and next, reflecting limited growth potential in mature markets, with earnings guidance suggesting a slight profit decline.
- Increased Competitive Pressure: PayPal faces significant competition from platforms like Apple Pay and Block's Cash App, which are well-positioned in consumers' minds, with projections indicating Apple Pay's user base will grow from 65.6 million to 84 million, outpacing PayPal's recent user growth.
- Lackluster Long-Term Outlook: Morningstar forecasts that PayPal's annual revenue will rise from $33.2 billion last year to $41.1 billion by 2030, with an annualized growth rate just above 4%, which barely keeps pace with inflation, leading investors to remain cautious about future valuation increases.
See More
Analysis of Stocks Under $50
- Redwire Stock Risks: Redwire (NYSE:RDW) is currently priced at $15.14, and its historically negative EPS raises concerns for conservative investors, while a 14 percentage point decline in free cash flow margin over the past five years indicates increased investments to maintain market position, potentially leading to liquidity issues and the need for additional equity financing that could dilute shareholder value.
- PayPal's Growth Struggles: PayPal (NASDAQ:PYPL) is trading at $44.35, with only 5.3% annual sales growth over the past two years, significantly lagging behind peers, and its 2.8% annual EPS growth has not kept pace with revenue gains, suggesting difficulties in generating incremental demand from its large revenue base, warranting caution from investors.
- Crescent Energy Investment Opportunity: Crescent Energy (NYSE:CRGY) is priced at $13.11, boasting an impressive 41.5% annual revenue growth over the past five years, reflecting significant market share gains, and its superior unit economics yield a gross margin of 59%, making it a free cash flow powerhouse with the flexibility to invest in growth or return capital to shareholders.
- Market Dynamics Observation: In the current market environment, investors should focus on stocks that not only possess high-quality businesses but also pay attention to their recent market movements to seize potential investment opportunities, with StockStory's list of strong momentum stocks being particularly noteworthy.
See More
Investment Comparison: PayPal vs. Visa
- PayPal's User Growth Struggles: PayPal's active accounts grew from 426 million in 2021 to only 439 million by 2025, falling short of its 750 million target, resulting in an over 80% stock price drop over five years, highlighting severe growth potential issues.
- Revenue Growth Slowdown: Although PayPal's revenue grew at a 7% CAGR from 2021 to 2025, its transaction take rates continued to decline, and intensified competition has put significant pressure on its overall profitability.
- Visa's Steady Growth: Visa's revenue and EPS grew at CAGRs of 14% and 16% from 2021 to 2025, showcasing the advantages of its asset-light business model, which allows rapid expansion into new markets while maintaining high margins.
- Diverging Future Outlooks: Analysts expect PayPal's revenue and EPS to grow at CAGRs of only 4% and 5% from 2025 to 2028, compared to Visa's projected 11% and 18%, indicating a stronger growth potential for Visa in the future.
See More
PayPal Reports Mixed Q1 Results Under New CEO Lores
- Revenue Growth: PayPal's Q1 revenue reached $8.4 billion, marking a 7% year-over-year increase; however, operating margins fell sharply from 20.7% to 18.4%, indicating challenges during the company's transition.
- Cash Flow Guidance: Management reaffirmed a full-year adjusted free cash flow target of at least $6 billion, yet the Q2 outlook triggered a sell-off, reflecting investor concerns about the company's transformation.
- Cost Savings Target: PayPal aims to achieve at least $1.5 billion in cost savings over the next two to three years through organizational simplification and AI adoption, which is intended to enhance operational efficiency and competitiveness.
- Decline in User Accounts: The total user accounts decreased to 439 million, with transaction take rates compressing to 1.62%, raising concerns about the company's competitive positioning, especially as Q2 guidance indicates weak revenue and transaction margin growth.
See More
