Summary of "Should You Buy PayPal Stock Before October 28? | PYPL Stock Analysis"

Should You Buy PayPal Stock Before October 28? | PYPL Stock Analysis

Company & Event

PayPal (Ticker: PYPL) will report Q3 2025 earnings on the morning of October 28, 2025.
This analysis explores whether to buy PYPL stock before the earnings release.

Recent Financial Performance

2025 performance is better than expected.
Management raised full-year guidance for transaction margin dollars and earnings per share (EPS) as of July 29, 2025.
Latest quarter highlights:
- Net revenues increased 5% year-over-year to $8.3 billion.
- Operating income rose 14% to $1.5 billion.
- Operating profit margin improved to 18.1%, up 134 basis points YoY.
Active accounts grew 2% YoY to 438 million, with a sequential increase of 1.7 million new active accounts quarter-over-quarter.
Payment transactions per active account declined 4% to 58.3 (trailing 12-month basis), indicating reduced engagement per user.

Competitive Landscape & Risks

PayPal is seen as a slower innovator in fintech.
It is losing market share to faster-growing competitors such as SoFi, Affirm, and Klarna.
These competitors have higher growth rates but trade at much higher valuations (forward P/E multiples 3-7x PayPal’s).
PayPal is considered more of a value stock with modest growth but an attractive valuation.

Valuation Metrics

PayPal’s forward Price-to-Earnings (P/E) ratio: ~13x.
SoFi’s forward P/E ratio: ~67x (over 5 times PayPal’s valuation).
S&P 500 average forward P/E: approximately 22-25x.
PayPal’s forward P/E is about half the average S&P 500 multiple.

Earnings Guidance & Growth

Expected Q3 2025 EPS: $1.16 (midpoint), up ~17% from $0.99 in Q3 2024.
Full-year EPS forecast: approximately $5.00, a ~25% increase from $3.99 in 2024.

Market & Macro Context

PayPal benefits from increasing online spending, which currently accounts for about 19% of total U.S. retail spending.
The shift toward online shopping is expected to grow significantly over the next few decades, providing a long-term tailwind.
PayPal’s convenience in online payments is a competitive advantage versus traditional credit card networks like Visa and Mastercard.
However, PayPal lacks a competitive advantage in in-person payments.

Valuation Methodology

A proprietary Discounted Cash Flow (DCF) model values PayPal at an intrinsic value of $135 per share.
Current market price is around $70, implying significant undervaluation.
Both forward P/E valuation and DCF suggest PayPal is undervalued relative to its growth and earnings potential.

Investment Recommendation

The presenter rates PayPal stock as a buy before the October 28 earnings report.
Risks include losing market share to more innovative fintech competitors.
The potential reward is considered worth the risk given valuation and growth prospects.

Methodology / Framework Shared

Two valuation methods used:
- Forward Price-to-Earnings (P/E) ratio comparison.
- Proprietary Discounted Cash Flow (DCF) model for intrinsic valuation.
Analysis of growth metrics including revenue, operating income, profit margins, active accounts, and transaction engagement.
Competitive benchmarking against fintech peers (SoFi, Affirm, Klarna).
Macro trend analysis focusing on the growth of online retail spending.

Key Numbers & Dates

Metric Value Earnings report date October 28, 2025 (morning) Latest quarter revenue $8.3 billion (+5% YoY) Operating income $1.5 billion (+14% YoY) Operating margin 18.1% (+134 bps YoY) Active accounts 438 million (+2% YoY; +1.7M QoQ) Payment transactions per active account 58.3 (-4% YoY) Forward P/E 13x (PayPal); 67x (SoFi) Q3 2025 EPS estimate $1.16 (17% growth YoY) 2025 full-year EPS forecast $5.00 (25% growth YoY) Intrinsic value per DCF $135 vs. market price ~$70 Online retail spending ~19% of total U.S. retail spending

Disclaimers

The presenter notes risks related to market share loss and innovation pace. The analysis is presented as the presenter’s opinion and does not constitute explicit financial advice. The video is sponsored by The Motley Fool.

Presenter / Source

Presenter: Unnamed individual (likely a finance YouTuber or analyst).
Sponsor: The Motley Fool.
Mention of an investing book by the presenter describing a six-step stock evaluation framework (details not elaborated).

Summary

PayPal (PYPL) is trading at a relatively low valuation (forward P/E ~13x) compared to fintech peers and the broader market, despite modest growth and some risks from competition. The company’s improving financial metrics and the long-term trend of increasing online spending support a bullish case. The presenter’s DCF valuation suggests PYPL is undervalued at current prices (~$70 vs. intrinsic $135). The recommendation is to buy PYPL stock ahead of the Q3 2025 earnings release on October 28, 2025.