Architect of Alpha
Long-Term Stock Investor
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 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 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 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 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 beat-and-raise quarter supports the bull case. Per @DeItaone, Q2 EPS was $1.38 versus $1.28 expected, revenue $8.68B versus $8.47B and payment volume $486.5B versus $468.5B, and full-year adjusted EPS guidance rose to about $5.38. PayPal plans $6B of buybacks this year and at least $1.5B of cost savings over 2-3 years, though it expects a low-single-digit decline in Q3 adjusted EPS. 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
PayPal's standalone turnaround plan is unlikely to work because its new focus areas are the same ones it has failed at for years. Per @wallstengine, CEO Enrique Lores is pursuing the plan after Stripe and Advent's $50B+ takeover talks stalled, focusing on expanding Venmo into a broader financial app, improving checkout and cutting billions in costs. 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's problem is deeply rooted poor management and a complete lack of ambition; it could have made a dozen moves over the years to expand and grow. Stripe appears to be the only buyer willing to take it on. x.com x.comÂ
