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With a market capitalization of $74.1 billion, PayPal (PYPL) has been a dominant force in the digital payments industry, providing a platform that allows consumers and merchants to transact seamlessly around the world. The company has been on a transformation journey since CEO Alex Chriss took over in 2023, with a focus on profitable growth and operational efficiency.
The company reported strong fourth-quarter and full-year results on Feb. 6. PayPal successfully navigated 2024, laying the groundwork for sustained growth. However, the company is still in the transformation stage.
With heavy competition in the digital payment industry with Visa (V), Mastercard (MA), and others, PayPal’s growth has slowed down. So far, the stock is down 13% in 2025, compared to the S&P 500 Index’s ($SPX) gain of 2.5%. Let’s find out if the stock can hit its high price estimate of $125 this year.
2024 Was the Year of Execution for PayPal
In the fourth quarter of 2024, PayPal reported net revenue growth of 4% year-over-year to $8.4 billion, with total payment volume (TPV) reaching $437.8 billion, up 7% year-over-year. Adjusted earnings per share (EPS) increased by 5% to $1.19 per share and 21% to $4.65 for the year. For the full year 2024, net revenue came in at $31.8 billion, a 7% increase from 2023, with a TPV of $1.68 trillion. In 2024, the total number of active accounts reached 434 million. Venmo’s monthly active user base increased by 4% in 2024, to 64 million. Venmo monetization is also improving, with a “20% increase in Venmo Debit Card and Pay with Venmo monthly active accounts.”
The company implemented repricing initiatives in its Braintree unit, which handles transactions for major clients such as Uber (UBER) and Airbnb (ABNB). While these efforts increased transaction margins, they also raised concerns about potential customer attrition and slowed revenue growth. In Q4 2024, Braintree’s payment volume growth slowed to 2%, down from 30% in 2023. Furthermore, management stated that a few large Braintree merchant renegotiations might hinder revenue growth by about five points in 2025. Susquehanna analyst James Friedman believes investors are increasingly skeptical of Braintree’s market share and future growth prospects.
Last year, PayPal made a strategic partnership with Shopify (SHOP) that aims to strengthen PayPal’s presence in the e-commerce market. Under the deal, PayPal wallet transactions will be integrated into Shopify Payments in the U.S., increasing payment flexibility and operational efficiency for both PayPal and Shopify merchants. The company generated adjusted free cash flow of $6.6 billion and returned $6 billion to shareholders through share repurchases. It ended 2024 with cash, cash equivalents, and investments totaling $15.4 billion, alongside debt of $11.1 billion.
In 2025, the company intends to prioritize four key areas: innovation, product adoption, partnerships, and efficiency and effectiveness through the use of artificial intelligence (AI) and automation. A strong balance sheet with sufficient cash flows should help the company fund its growth plans.
2025: Transformation Will Continue
In 2025, PayPal’s top priority will continue to be improving the checkout experience. PayPal introduced many new checkout experiences in 2024, including PayPal Everywhere, Fastlane (a one-click guest checkout process), smart receipts, and PayPal Complete Payments. These initiatives reduced latency by more than 40% and increased conversion rates by more than 100 basis points in 2024. Furthermore, buy now, pay later (BNPL) is proving to be a strong driver of growth for the company, with its TPV reaching $33 billion, up 21% year-over-year.
PayPal is also transitioning from a standalone payment solution to a fully integrated suite for small and medium-sized businesses (SMEs). In 2024, PayPal’s Complete Payments platform processed 45% of SMB TPV. During the Q4 earnings call, management highlighted how key partnerships with NBCUniversal, Roku (ROKU), and StockX have already fueled Fastlane’s growth. PayPal plans to expand its reach by collaborating on more strategic deals in 2025.
Looking ahead to the first quarter of 2025, PayPal projects transaction margin dollar growth of 4% to 5%, resulting in adjusted EPS growth of 6% to 8% to $1.15 to $1.17 per share. For the full year 2025, adjusted EPS is expected to range between $4.95 and $5.10, representing 6%-10% growth. Transaction margin dollars could increase by 4% to 5% by 2025. The company also intends to generate $6 billion to $7 billion in free cash flow and repurchase shares worth $6 billion as part of its $15 billion stock repurchase program.
While these projections indicate confidence in the company’s strategic direction, challenges such as increased competition and the potential impact of repricing strategies necessitate cautious optimism.
For fiscal 2025, analysts forecast a revenue increase of 4%, followed by earnings growth of 8.2%. Additionally, revenue and earnings could increase by 6.6% and 12% in fiscal 2026, respectively. Currently, PayPal stock is trading at 14 times forward 2025 earnings, compared to its five-year historical price-to-earnings average of 50.5x, making it a reasonable buy.
Is PayPal Stock a Buy, Hold, or Sell on Wall Street?
Analysts have mixed views on PayPal’s stock, with an overall “Moderate Buy” rating. Over half of the 41 analysts covering the stock rate it as a “Hold,” 17 rate it a “Strong Buy,” two rate it a “Moderate Buy,” and one says it is a “Strong Sell.” The mean target price for the stock is $93.62, which is 24.9% higher than current levels. The stock’s high target price of $125 implies 66.7% potential upside over the next 12 months.
The Verdict
PayPal remains a major player in the digital payments industry, with a solid financial foundation and strategic initiatives aimed at sustaining growth. However, the company is facing headwinds from increased competition and internal restructuring initiatives. If the company can successfully navigate macroeconomic challenges while capitalizing on growth opportunities in the evolving digital payments space, $125 seems like an attainable target price for this fintech stock.
