What Offers PayPal (PYPL) a Meaningful Long-Term Optionality?

Longleaf Partners, managed by Southeastern Asset Management, released its fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. The Fund returned 3.35% in the quarter, compared to the S&P 500’s 2.66% and the Russell 1000 Value Index’s 3.81% return. 2025 was a challenging year for the firm, as it did not have any standout performers. Approximately 5% of the portfolio gained 20% or more, while 35% of the S&P 500 hit that level. The overall market dynamic drove the Fund’s underperformance. The firm focuses on actions to strengthen portfolio outcomes rather than chasing winners at the wrong time. The firm reiterates that building a portfolio of real companies on offense in a period of excessive speculation will benefit all markets. In addition, please check the Fund’s top five holdings to know its best picks in 2025.

In its fourth-quarter 2025 investor letter, Longleaf Partners Fund highlighted PayPal Holdings, Inc. (NASDAQ:PYPL) as a performance detractor in 2025. PayPal Holdings, Inc. (NASDAQ:PYPL) is a technology platform that enables digital payments. On January 16, 2026, PayPal Holdings, Inc. (NASDAQ:PYPL) stock closed at $56.88 per share. One-month return of PayPal Holdings, Inc. (NASDAQ:PYPL) was -4.88%, and its shares lost 38.04% of their value over the last 52 weeks. PayPal Holdings, Inc. (NASDAQ:PYPL) has a market capitalization of $54.337 billion.

Longleaf Partners Fund stated the following regarding PayPal Holdings, Inc. (NASDAQ:PYPL) in its fourth quarter 2025 investor letter:

"PayPal Holdings, Inc. (NASDAQ:PYPL) – Digital payments platform PayPal was a detractor in 2025. While the company made real operational progress stabilizing and growing transaction margin dollars, expanding profit margins through improved cost discipline, accelerating FCF generation, and returning substantial capital through buybacks the market remained focused on the lack of further acceleration in Branded checkout volume, which grew in the mid-single-digit range while investors were hoping for high-single-digit growth. Increased reinvestment in marketing and technology combined with macro pressure on discretionary spending further weighed on sentiment. Despite the stock’s underperformance, PayPal’s scale, two-sided network, and deep transaction-level data across hundreds of millions of consumers and tens of millions of merchants remain underappreciated assets that provide meaningful long-term optionality."

PayPal Holdings, Inc. (NASDAQ:PYPL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 86 hedge fund portfolios held PayPal Holdings, Inc. (NASDAQ:PYPL) at the end of the third quarter, compared to 89 in the previous quarter. While we acknowledge the potential of PayPal Holdings, Inc. (NASDAQ: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.

In another article, we covered PayPal Holdings, Inc. (NASDAQ:PYPL) and shared Wedgewood Partners' views on the company. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.

READ NEXT: The Best and Worst Dow Stocks for the Next 12 Months and 10 Unstoppable Stocks That Could Double Your Money.

Disclosure: None. This article is originally published at Insider Monkey.