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Shares of the digital payment company PayPal (PYPL) are down about 25.6% in the year to date. While PYPL stock has lost notable value this year, its fundamentals remain solid, reflected by a steady increase in payment volumes, transaction margin dollar growth, and improved earnings.
The financial technology company’s focus on enhancing its branded checkout offerings, strengthening its peer-to-peer (P2P) platform, ongoing momentum in Venmo, and value pricing strategy positions it well to deliver solid growth in 2025. Moreover, its focus on driving efficiency and boosting margins will cushion its bottom-line growth in the coming years, which makes its valuation too cheap to ignore near the current market price.
PayPal’s Solid 2024 Performance
In 2024, PayPal’s total payment volume (TPV) reached nearly $1.7 trillion, marking a significant 10% increase. This growth reflects the continued strong demand for PayPal’s services. Furthermore, PayPal generated $32 billion in revenue, representing a 7% year-over-year increase. This revenue growth reflects the company’s ability to monetize its vast transaction volume effectively.
PayPal’s adjusted earnings per share (EPS) increased by 21% year-over-year. This significant growth in EPS highlights the company’s improving profitability and operational efficiency. The company generated $6.8 billion in free cash flow and returned significant cash to its shareholders through share buybacks.
PayPal enhanced its products in 2024, including new branded checkout features, Fastlane, PayPal Everywhere, and expanded PayPal Complete Payments. These innovations have already shown positive results, with Fastlane adoption expected to accelerate in 2025 through strategic partnerships. PayPal has also invested in artificial intelligence (AI) and automation to enhance operational efficiency, which will support future earnings growth.
PayPal’s ability to drive TPV and generate robust free cash flow provides financial flexibility to invest in growth and enhance shareholder value.
PayPal Poised to Deliver Solid Growth
PayPal’s growth will likely be driven by strengthening its checkout solutions and expanding its omnichannel offerings. Moreover, Venmo’s expansion will accelerate its growth. The company’s checkout improvements are reducing transaction delays and boosting conversion rates. Further, the rollout of its enhanced checkout solution to new markets will likely accelerate its growth in domestic and international regions.
The buy now, pay later (BNPL) service continues to be a growth driver. In 2024, it generated $33 billion in TPV, marking a 21% increase year-over-year. Consumers using BNPL are spending more, driving PayPal’s volumes and growth.
Fastlane has rapidly gained traction, with nearly 2,000 merchants adopting the service. Notably, a majority of Fastlane users are either new or previously inactive PayPal users, signaling strong potential for broader adoption.
Additionally, PayPal is strengthening relationships with major merchants by offering enhanced value-added services, which will support its growth. For instance, the launch of FX-as-a-service (automated currency conversion) and expanded automated billing capabilities are expected to contribute to long-term transaction margin dollar growth.
PayPal is extending its reach into physical retail with its omnichannel strategy. The introduction of PayPal Everywhere in September 2024 increased debit card adoption and drove TPV. Further, PayPal’s management highlighted consumers have been using their PayPal debit cards primarily for categories that encourage consistent spending. This will support future TPV and its growth.
Looking forward, PayPal plans to expand PayPal Everywhere to multiple European markets in 2025. This international expansion provides another avenue for growth as PayPal cements its presence in key global markets.
Venmo remains a key growth engine for the company, with user engagement rising steadily. Monthly active accounts reached 64 million, and revenue per active user saw notable growth in 2024. Adoption of Venmo debit cards and the Pay with Venmo feature surged, with respective growth rates exceeding 30% and 20%. With major brands now accepting Venmo, the company will see significant growth.
Financial Outlook and Investment Case
While PayPal expects temporary headwinds from renegotiations with large Braintree merchants in 2025, these adjustments are designed to boost long-term transaction margins. Management anticipates transaction margin dollar growth of over 10% annually in the long term, with EPS projected to grow at a rate exceeding 20%.
Despite these strong fundamentals and solid growth prospects, PayPal stock remains attractively priced. Currently trading at just 11.3 times its projected 2026 EPS of $5.65, the stock looks too cheap to ignore, considering its double-digit earnings growth potential.
Wall Street analysts have a “Moderate Buy” consensus rating on PayPal stock. Their average price target of $92.23 implies a significant upside potential of 44% from current levels.
