Nicholas Mugalli
Institutional TMT & Macro Research, AI/Semiconductors/Policy
PayPal faces structural disintermediation as agentic commerce and ecosystem wallets like Apple Pay and Google Pay erode its role as a checkout intermediary. Branded checkout grew just 1.0% in Q4 2025, a sign it is losing the buy button, despite over $6B of annual free cash flow. CEO Enrique Lores is pivoting to agentic infrastructure with ChatGPT, but with a $9B refinancing looming, PayPal looks a value trap until AI-first growth outpaces Apple and Google. x.comÂ
PayPal's near-flat growth and rising checkout competition leave it a Grade C, prove-it story. Q3 FY26 revenue rose just 2%; operating income fell 8% as restructuring charges rose from $69 million to $255 million, and net income fell 14%. The business still earns over $1 billion a quarter, but it is treading water. x.comÂ
PayPal's cost cuts and reserve releases prop up short-term numbers, while investing for growth wastes time. Its slow bleed gives delusional bulls hope, making it the ultimate value trap; it should not be a public company. x.comÂ
PayPal's raised earnings and free-cash-flow guidance supports rejecting Stripe and Advent's $60.50-per-share offer. The shares now trade around $57, below the rejected bid, but that does not make the rejection a mistake. x.comÂ
PayPal is still growing, but the quality of its growth keeps worsening, which justifies a compressed multiple. Revenue rose 7% and TPV 11%, yet transaction margin dollars grew only 3%, operating income fell and GAAP EPS dropped 6% as operating margin shrank about 200 basis points. That points to Stripe, Adyen, Apple and Google eroding pricing power. Engagement is flattening, and guidance for falling near-term EPS signals a trend. At 10x earnings it is a fair business, not a great one. x.com … Show more
PayPal's growth has stalled and it faces too much fintech competition. That view could change if the company adapts, pivots and proves otherwise. x.comÂ
PayPal's downside finally looks done after a 10-year round trip, leaving the stock undervalued at a P/E of 8 and a PEG ratio of 0.8. A solid Q2 report could start a recovery back to $60+. x.comÂ
PayPal is a value trap with a great story until a real catalyst appears. At about 8x forward earnings it is near a decade low and cheaper than JPMorgan, but cheapness has been the thesis for two years while it kept getting cheaper. A re-rating needs a trigger: a buyer, a turn in Venmo monetization, or price carving a higher low to prove the bleed is over. x.comÂ
PayPal faces an existential competitive threat from X Money, which will kill its business. x.comÂ
PayPal's selloff makes it even more attractive to a strategic buyer. The stock trades at about $5 per share of 2026 EPS guidance, yet is being dumped because the long restructuring timeline leaves "no urgent reason to buy it." x.comÂ
PayPal is a low-switching-cost, low-moat business headed for secular decline as payment fees race to the bottom. In 2021 it wanted to buy Pinterest for $45B; now Stripe reportedly wants to buy it for $53B. Stripe is probably the best suitor by far, as a good tuck-in acquisition. x.com x.comÂ
