Investment Case Updated: November 21, 2025
Price: $60.57 (11/21)
Market Capitalization: $56.7B
Enterprise Value: $57.9B
What the Company Does
PayPal is a leading payment processor facilitating transactions for 438 million customer accounts in more than 200 markets around the world. PayPal primarily generates revenues by charging volume-based fees on transactions but also earns interest on consumer credit products and customer balances. The company processed roughly 26 billion transactions worth ~$1.7 trillion in 2024 (equivalent to Australia’s GDP), with 28% of this volume coming from PayPal’s legacy branded business, 36% from unbranded (i.e. not PayPal) card processing, 25% from peer-to-peer (P2P) transactions, and the balance coming from other merchant services and eBay.
Why We Own It
PayPal is a high-quality business with a recently refreshed management team, strong growth prospects and a compelling valuation. Alex Chriss started as CEO in September of 2023 and formerly led Intuit’s small business group, where he grew customers and revenues at annual rates of 20% and 23%, respectively. He is now taking the same customer-first approach to PayPal’s massive installed base in an effort to improve the customer experience and reduce waste. New products like Fastlane improve the user checkout experience and purchase conversion, while unbranded efforts are also starting to see a profitability boost. Peer-to-peer transaction app Venmo offers significant growth potential via monetization of the app’s ~66MM users with initiatives such as the Venmo debit card and ‘Pay with Venmo’ expected to fuel a low-teens revenue compound annual growth rate (CAGR) through 2027 for the app (vs. 20%+ year-to-date). Even as PYPL transitions into a more diversified omnichannel platform, its ecommerce roots are desirable, with the global ecommerce market expected to grow at a ~7% CAGR to an ~$8T market by the end of 2027, providing organic tailwinds for PYPL’s core checkout business. PYPL’s burgeoning “buy now, pay later” (BNPL) business, which is boasting 20%+ growth in total payment volume (TPV) on its way to ~$40B in TPV this year, recent partnerships with ChatGPT and Google AI to offer checkout solutions, and PayPal World, a collaboration with premier digital wallet companies, which could extend PYPL’s branded checkout business from 400MM customers to >2B customers worldwide, represent long-term, attractive growth levers that further expand the company’s addressable market.
Management’s turnaround efforts are starting to flow through to the bottom line, with FY25 guidance for transaction margin dollar and Adjusted EPS growth of 6.5% and 15.5%, respectively, clearly tracking towards management’s targets for high single-digit transaction margin dollar growth and low-teens Adjusted EPS growth by the end of 2027. Despite impressive scale, robust profitability, and multiple avenues for potential growth, shares trade at a forward (FY25) price/free cash flow multiple of 9.7x, or a roughly 52% discount to peers (SQ, MA, V, AXP, FI, FIS, ADYEN NA, GPN).
How Management Allocates Capital
With minimal net debt, a highly cash-generative business model, and an aligned management team, the company plans on spending $6B to repurchase stock this year, or ~11% of the company’s current market cap. Management also initiated a dividend in 3Q25 (~0.9% annualized yield) strengthening an already generous shareholder return program that targets returning 70-80% of free cash flow to shareholders. Management’s top priority is investing in the business, adding that they are more focused on growing and investing in their current portfolio of assets, but will maintain flexibility for “selective” M&A opportunities.
We originally posted our investment case for PYPL on August 26, 2024.