# PayPal (PYPL)

Sector: Digital payments

| Field | Value |
|---|---|
| Price | $57.16 |
| Fair value (Analysts) | $80.00 |
| Discount to fair value | 28.6% |
| Fair value uncertainty (Analysts) | High |
| Economic moat (Analysts) | Narrow |
| LSEG analyst rating (1 strong buy to 5 strong sell) | 2.85 |
| Data as of | 2026-10-16 |
| Next earnings | 2026-10-27 (estimate) |

## In short

Investors fear that PayPal keeps losing branded checkout share to other wallets and AI agents, so only years of steady checkout growth under the new CEO can close the gap.

## Themes and gap

- Themes: AI disruption risk (ai-disruption), New management (management-change), Weak consumer (weak-consumer)
- Gap type: Slow (slow)
- Why: The fear of share loss to other wallets and AI agents fades only after years of steady growth in branded checkout.

## About

PayPal runs online payment services for consumers and merchants in about 200 markets. Its main products are PayPal branded checkout, the Venmo app for payments between people and to merchants, and Braintree, which processes card payments for large merchants without the PayPal brand. PayPal earns a fee on most payments, and branded checkout earns a higher margin than unbranded processing. It also earns interest on customer balances and on its buy now, pay later and other loans, and it sells PayPal and Venmo debit and credit cards. In Q2 2026, it processed $486.4 billion of payments and had 439 million active accounts. Since April 2026, it runs three businesses: Checkout Solutions & PayPal, Consumer Financial Services & Venmo, and Payment Services & Crypto.

## Thesis

The market fears that PayPal's most profitable business, branded checkout, will keep losing share. Apple Pay, Shop Pay and other wallets compete at the online checkout, and AI shopping agents, such as Meta's Muse, can move the purchase decision away from the PayPal button. In Q2 2026, payment volume grew 10%, but transaction margin dollars grew only 1% and the non-GAAP operating margin fell 248 basis points. Active accounts were almost flat at 439 million. PayPal named Enrique Lores CEO in February 2026, and he started a new reorganization, so investors also wait to see whether the turnaround plan works. For the gap to close, three things must be true. Transaction margin dollars excluding interest on customer balances must grow faster than the 3% of Q2 2026, with branded checkout stable or growing. PayPal must reach its raised 2026 non-GAAP EPS guidance of about $5.38 while it keeps share buybacks near $1.5 billion a quarter. Venmo must keep growing its revenue, and PayPal must win a share of payments that AI agents make, as with its Meta Muse checkout deal of September 2026. The Q3 report, expected in late October 2026, is the next test, and the Q4 report with the 2027 outlook in early February 2027 is the second. Because the fear of share loss to wallets and AI agents fades only with years of steady checkout growth, the gap can close only slowly.

## Checkpoints

- Oct 27, 2026 (estimate): Q3 2026 results: checkout and transaction margin. Status: Pending. Watch: Transaction margin dollars excluding interest on customer balances that grow faster than the 3% of Q2 and a 2026 EPS guidance kept near $5.38 pass; slower growth or a lower guidance fails.
- Feb 2027 (estimate): Q4 2026 results and 2027 outlook. Status: Pending. Watch: A 2027 outlook with growth in non-GAAP EPS and transaction margin dollars passes; another year of falling margins fails.

## Balance sheet

- Cash: $15.3B
- Debt: $13.5B
- Net cash: $1.8B
- Interest cover: 12×
- Debt due within 12 months: $2.5B
- Last debt due: 2062

PayPal has more cash and investments than debt. At June 30, 2026, cash, cash equivalents and investments were $15.3 billion. These exclude the $39.7 billion of funds receivable and customer accounts, which belong to customers. Debt was $13.5 billion: $12.7 billion of senior notes, $200 million of commercial paper and ¥90 billion, about $556 million, drawn on the Paidy credit facility. In May 2026, PayPal issued $2.0 billion of new notes due 2028, 2031 and 2036. The debt due within 12 months includes $1.25 billion of 2.650% notes due October 1, 2026, the Paidy facility due February 2027, $500 million of notes due June 2027 and the commercial paper. Interest cover is operating income divided by interest expense for the first half of 2026. PayPal returned $6.0 billion to shareholders with buybacks over the 12 months to June 30, 2026, and it also pays a quarterly dividend of $0.14 per share.

As of 2026-06-30.

Sources:

- https://www.sec.gov/Archives/edgar/data/1633917/000163391726000082/pypl-20260630.htm
- https://www.sec.gov/Archives/edgar/data/1633917/000163391726000080/pypl2q-26earningsrelease.htm

## Recent events

- 2026-10-05: Venmo said that its credit card now pays up to 4% cash back on purchases that users split with friends.
- 2026-09-22: PayPal said that its customers will be able to shop and check out with Meta's Muse AI agent at PayPal merchants. PayPal did not give financial terms or a launch date.
- 2026-07-28: PayPal reported Q2 2026 results. Revenue rose 5% to $8.7 billion, and payment volume rose 10% to $486.4 billion. Transaction margin dollars rose 1% to $3.9 billion, and non-GAAP EPS fell 1% to $1.38. Free cash flow was $1.8 billion, and buybacks were $1.5 billion. PayPal raised its 2026 non-GAAP EPS guidance to about $5.38.
- 2026-05-05: PayPal reported Q1 2026 results and gave details of its new operating model. It guided 2026 non-GAAP EPS from a low-single-digit decline to slightly positive.
- 2026-04-29: PayPal reorganized into three businesses: Checkout Solutions & PayPal, Consumer Financial Services & Venmo, and Payment Services & Crypto. The heads of the Consumer Group and of the Small Business & Financial Services Group left the company.

## Risks

- High: Apple Pay, Shop Pay and other wallets compete with PayPal branded checkout, which earns PayPal's highest margin. If PayPal keeps losing share at the online checkout, its profits can fall.
- High: AI shopping agents from large technology companies can choose the payment method for the user. If these agents favor other wallets or take a fee, PayPal's role and margin at checkout can shrink.
- Medium: A new CEO, a new structure and many leadership changes in 2026 bring execution risk. The turnaround can bring more charges and job cuts before growth returns.
- Medium: PayPal holds buy now, pay later and other consumer loans. A weaker consumer can raise loan losses and reduce payment volume.

## Links

- Page: https://picks.kamadorueda.com/company/PYPL/
- History of changes: https://picks.kamadorueda.com/company/PYPL/history/
- JSON with full history: https://picks.kamadorueda.com/data/company/PYPL.json

> Picks is a personal record of stock picks. It gives information only, not financial, investment, tax or legal advice. Prices, fair values and ratings can be delayed or wrong; check the original source. Full disclaimer: /disclaimer/.