We came across a bullish thesis on PayPal Holdings, Inc. (PYPL) on Emerging Value’s Substack. In this article, we will summarize the bulls’ thesis on PYPL. PayPal Holdings, Inc. (PYPL)’s share was trading at $74.61 as of 11th June. PYPL’s trailing and forward P/E were 16.77 and 15.13 respectively according to Yahoo Finance.
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PayPal’s Q1 2025 results delivered a mixed bag: revenue grew only 1%, TPV (Total Payment Volume) dropped 7% to 6.0 billion, though excluding the low-margin PSP segment, TPV rose 6%. Active accounts ticked up 2% to 436 million, a modest gain that softens enthusiasm. However, the bright spots: GAAP operating income jumped 31% to $1.5 billion and operating margin expanded nearly 450 bps to 19.6%.
The most profitable branded checkout (+6% TPV) and Venmo (+10%) segments are delivering strong volume growth, while PSP growth has slowed to 2% as PayPal trims its unprofitable Braintree business. Transaction margin rose 7%, fueling a 17% increase in value-added services revenue, driven by credit offerings and nascent ad products.
Looking ahead, Q2 EPS is guided to $1.29–$1.31 (+9%), with full‑year non-GAAP EPS growth forecast at 6–10%. Management positioned this conservatively, likely to under-promise and over-deliver. Opex cuts—particularly in support and admin—will moderate in 2025, while a $6 billion buyback (≈7% of market cap) bolsters EPS, though tax rate increases to 25% dampen net gains.
Strategically, PayPal is shifting from commoditized payments to a broader commerce platform, monetizing through credits, ads, AI-powered “agentic commerce,” B2B offerings, and “Fastlane” checkout. These initiatives aim to increase take‑rates and attach more services per user. While most effects won’t show until 2026+, the company’s strong unit economics, operating leverage, and strategic repositioning point to sustainable EPS growth—possibly in the low teens.
If PayPal sustains 12% growth and re-rates to ~20x, its ~2027 EPS of ~$6.40 gives a potential stock price around $128, compared to today’s ~$73. This presents a compelling long-term upside.
We previously covered a bullish thesis on PayPal (PYPL) that emphasized its accelerating transaction margins, AI-driven innovation, and momentum in high-value segments like BNPL, Venmo, and value-added services. The stock has appreciated by approximately 12.5 % since our coverage. A complementary view from Emerging Value echoes this optimism while adding a valuation-focused lens. Both theses agree on PayPal’s strategic pivot away from commoditized PSP volumes toward higher-margin branded checkout and integrated commerce.