PayPal Faces Competitive Pressure Amidst Declining Share Prices

PayPal's stock has dropped 17% YTD, facing intense competition. The company is still attractive for long-term investors, with guidance suggesting a potential growth in EPS of 6-10% for 2025. Investors should consider the competitive landscape before deciding.

Date: 27-03-2025

AI Rating: 5

Intensifying Competition and Stock Performance
PayPal's stock (PYPL) has seen a significant decline of 17% year to date, primarily due to increasing competition from entities like Apple Pay (among others) and unfavorable macroeconomic conditions. With the impending risk of a recession linked to tariffs proposed by the U.S. government, this has the potential to further dampen investor sentiment.

Valuation Metrics
Despite this downturn, some positivity is reflected in PayPal's valuation metrics. The forward 12-month P/E ratio stands at 13.7X, which is markedly lower than the Financial Transaction Services industry average of 23.56X, indicating a potentially undervalued stock. This could attract value-focused investors looking for bargain opportunities.

Earnings Performance and Guidance
PayPal's guidance for 2025 suggests a non-GAAP earnings per share (EPS) growth range of 6-10%, with higher growth projected in subsequent years. The Zacks Consensus Estimate currently stands at $5.02 per share, reflecting a 7.96% increase over 2024. Importantly, the company has consistently beaten earnings expectations over the last four quarters, demonstrating a robustness in its earnings potential.

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