PayPal Holdings Inc. (PYPL), a digital payment titan, has revolutionized online transactions across nearly 200 markets. With its secure and user-friendly services like branded checkout and Venmo, PayPal has become synonymous with financial technology. Yet, despite its market dominance and strong earnings report for Q4 2024 disclosed in Fab. 4, PYPL stock plunged 13% afterward, causing anxiety for its investors.
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If you wish to read more extensively on PYPL, I recommend reading what our analyst on Tipranks, Bernard Zambonin, has written about PayPal right here.
Q4 2024: Strong Earnings, Harsh Reaction
PayPal closed out 2024 with a robust financial performance, surpassing Wall Street’s expectations. The company reported Q4 revenue of $8.37 billion, marking a 4.2% year-over-year increase and exceeding estimates by 1.2%. Earnings per share (EPS) reached $1.19, beating forecasts by $0.07. Additionally, total payment volume soared to $437.8 billion, up 6.8% year-over-year, with transaction margins improving beyond guidance.
Adding to the positive vibes, PayPal unveiled a colossal $15 billion share repurchase program, representing 17% of its market cap. For 2025, management projected non-GAAP EPS growth of 6% to 10% and transaction margin growth of 4% to 5%, primarily in line with expectations. However, one figure fell short: free cash flow guidance of $6.5 billion, trailing the $6.8 billion reported in 2024.
Why Did PayPal’s Stock Crash?
Despite these impressive numbers, PayPal shares plummeted 10% following the Q4 earnings release. What triggered the sell-off? The main culprit was its branded checkout business, a core segment that investors hoped would show renewed momentum. Instead, growth remained lethargic at just 6% annually, slightly better than the previous year.
Analysts also pointed to Apple Pay’s (AAPL) growing influence as a key threat to PayPal’s checkout business. Investors had anticipated a more substantial recovery, but PayPal’s management did not present a promising shift in strategy for 2025. This uncertainty shook the market, leading to the stock’s worst single-day decline since 2022.
A Buying Opportunity?
While Wall Street’s reaction was crushing, some analysts believe PayPal is undervalued. The stock trades at 11x to 13x forward free cash flow, a steep discount compared to its historical valuation and industry peers. With a renewed focus on profitability, strategic acquisitions, and a massive share buyback plan, PayPal could set the stage for long-term value creation. For investors who can look past the short-term fears, PayPal’s beaten-down valuation might present an attractive entry point.
Is PYPL a Buy or a Sell?
On Wall Street, PayPal is considered a Moderate Buy, with an average price target of $96.08. This implies a 24.28% upside potential.
