PayPal Holdings, Inc. (PYPL): A Bull Case Theory

We came across a bullish thesis on PayPal Holdings, Inc. on Darius Dark Investing’s Substack. In this article, we will summarize the bulls’ thesis on PYPL. PayPal Holdings, Inc.'s share was trading at $69.48 as of August 25^th. PYPL’s trailing and forward P/E were 14.88 and 14.12 respectively according to Yahoo Finance.

PayPal’s second-quarter 2025 results highlighted a paradox between strong operational performance and severe market skepticism. The company posted non-GAAP EPS of $1.40, up 17.6% year-over-year and well ahead of expectations, alongside 5% revenue growth to $8.3 billion. Management also raised full-year guidance, yet shares fell 11% post-earnings, extending a multi-year decline that has left the stock more than 75% below its 2021 peak. This sell-off underscores investor fatigue and suspicion that EPS growth is being driven by aggressive $6 billion buybacks rather than genuine operational strength.

Bears point to a 5% decline in total payment transactions and a 4% drop in transactions per active account, reinforcing concerns of eroding user engagement. However, excluding low-margin PSP volumes, transactions actually rose 6% and engagement grew 4%, driving a 7% increase in transaction margin dollars. This reflects a deliberate pivot by CEO Alex Chriss towards profitable growth, abandoning unprofitable volumes and focusing on branded checkout services. The turnaround rests on three pillars: a $300 million re-engineering initiative to modernize infrastructure, bold innovation with “PayPal World” and “Pay with Crypto” to expand global interoperability, and an aggressive capital return program supported by a $15 billion repurchase authorization.

Competitive threats from Stripe and Square remain, but PayPal retains a unique moat through its trusted consumer brand, 438 million active accounts, and Venmo’s accelerating growth. While execution risks persist, the stock’s valuation—trading at less than 20x free cash flow with 10–12% projected earnings growth—appears to discount a worst-case scenario. With strong cash generation, activist oversight, and substantial buybacks, PayPal offers a skewed risk/reward profile that could reward patient investors.

Previously we covered a bullish thesis on PayPal Holdings, Inc. (PYPL) by Sergey in May 2025, which highlighted disciplined execution, high-margin growth initiatives, and innovation across Venmo, BNPL, and value-added services. The company’s stock price has appreciated approximately by 5% since our coverage. This is because the thesis played out with profitable growth. The thesis still stands as execution remains disciplined. Darius Dark shares a similar view but emphasizes the paradox between operational strength and market skepticism.

PayPal Holdings, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 92 hedge fund portfolios held PYPL at the end of the first quarter which was 94 in the previous quarter. While we acknowledge the potential of PYPL as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.