PayPal's Branded Checkout & OpEx Concern: Will Growth be Affected?

PayPal Holdings, Inc. PYPL shares fell 2.6% yesterday, after its CFO Jamie Miller highlighted that its branded checkout business is expected to grow a couple of points lower in the fourth quarter of 2025 compared with the previous quarter.

The company had consistent mid-single-digit growth in branded checkout for multiple previous quarters. Particularly, in the third quarter of 2025, branded experiences’ total payment volume (TPV) grew 8% on a currency-neutral basis, with online branded checkout rising 5%.

In the fourth quarter of 2025, the company plans to invest one-two points of transaction margin dollars into product attachment and habituation. In 2026, the company will continue investing, but higher operating expenses (OpEx) will lead to slower growth in both transaction margin dollars and earnings per share compared with 2025. This means OpEx is projected to grow at the same rate as the transaction margin dollar in 2026, instead of at half the rate that was expected before.

PayPal has noticed that consumers are spending less and the average order value has gone down. This trend has continued, and while people are still shopping online, they are being more careful with their spending due to macroeconomic uncertainty.

PayPal highlighted its investments in product innovation, including collaborations with partners like Perplexity, OpenAI and Google to develop "agentic commerce" experiences.

Buy Now, Pay Later (BNPL) and Pay with Venmo are continuing to have good momentum. BNPL continues to grow consistently at 20% quarter-over-quarter. Similarly, Pay with Venmo has grown at 40% quarter over quarter. About 30% of its BNPL product is in the US, with the remaining globally.

How are Other Companies Growing Their Business?

Block XYZ continues to launch new products across Square and Cash App, accelerating Gross Payment Volume (GPV) growth in Square and gross profit per monthly transacting active in Cash App. XYZ expects to deliver its strongest new volume added (NVA) performance in 2025 through expanding field sales, partner programs and targeted marketing.

Mastercard MA delivers healthy consumer and business spending and continued robust performance of its differentiated services. MA is growing its business through diversification beyond traditional payment card processing into services such as cybersecurity, data analytics and open banking, which now contribute a significant portion of its revenues.

PYPL’s Price Performance, Valuation & Estimates

Shares of PayPal have declined 28.9% year to date, underperforming both the broader industry and the S&P 500 Index.

From a valuation standpoint, PayPal shares are trading cheaply, as suggested by the Value Score of A. In terms of forward 12-month P/E, PYPL stock is trading at 10.50X, which is at a significant discount to the Zacks Financial Transaction Services industry’s 20.23X.

PayPal’s estimate revisions reflect a positive trend. The Zacks Consensus Estimate for full-year 2025 EPS has been revised upward over the past two months. The consensus estimate for 2025 EPS suggests a 14.8% increase year over year.

PayPal currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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