Is PayPal Stock a Buy at Less Than 10 Times Next Year's Earnings Guidance?
2026-10-15 10:30
•James Brumley •The Motley Fool
••• •••••• Axe Cap view
PayPal’s Cheap Valuation Masks Competitive Risks
PayPal trades under 10 times next year’s earnings but faces stiff competition from tech giants.
PayPal’s dramatic fall from grace—over 80% off its 2021 peak—has priced in a lot of bad news. At less than 10 times next year’s earnings and boasting a 13% net margin with steady user growth near 440 million accounts, the stock looks cheap. The company’s aggressive stock buybacks show confidence in its cash generation. But the shadow of stronger rivals like Google Pay and Apple Pay looms large, especially as these players embed payments into vast ecosystems, making it harder for PayPal to steal market share or grow meaningfully. For South Africa, the takeaway is indirect but worth watching through USD/ZAR: a weak dollar from a global tech slowdown could see the rand rally. If PayPal stumbles, that might dampen US tech sentiment and global flows to the rand. Still, if payment platforms consolidate or recover, it could lift prospects for SA’s fintech-linked sectors and listed tech proxies like Naspers and Prosus. this is just our opinion and not financial advice
Watch PayPal closely but avoid buying here; the valuation discount doesn’t justify ignoring competitive threats. Prefer to wait for clearer signs of sustainable growth or margin stabilization before adding exposure, especially through tech-heavy JSE counters.
- PYPL
- USD/ZAR
- Naspers
- Prosus
- Market underestimates PayPal's ability to fend off tech giants
- USD weakness driven by unrelated factors boosts rand unexpectedly
6/10
PayPal stock has declined over 80% from its 2021 peak due to increased competition from alternatives like Stripe, Wise, Google Pay, and Apple Pay. However, the article argues the stock is undervalued, trading at less than 10x forward earnings with a 13% net margin, 439 million active accounts, and modest but consistent growth. While PayPal's best growth days are behind it, the company continues to demonstrate resilience and profitability through stock buybacks and customer retention.
Our take is based on reporting first published by The Motley Fool.