Can PayPal Make a Turnaround With Its Buy Now, Pay Later Platform?

PayPal Holdings’ PYPL Buy Now, Pay Later (“BNPL”) business continues to demonstrate strong growth and strategic importance within its broader payments ecosystem. In the first quarter of 2025, PayPal reported more than 20% year-over-year growth in BNPL total payment volumes (TPV), along with an 18% increase in BNPL monthly active accounts. This momentum reflects both rising consumer adoption and improved visibility of BNPL options in PayPal’s redesigned branded checkout experience, which now features a modernized pay sheet and streamlined user flow.

The BNPL segment is a high-value proposition for PayPal. Data shows that BNPL users spend 33% more on average and conduct 17% more transactions, highlighting the segment’s importance in driving deeper engagement and higher revenue per user. These benefits are now amplified by PayPal’s efforts to surface BNPL more prominently at checkout and incorporate it into broader personalization strategies using AI and smart wallet features.

On the global front, PayPal is leaning into its BNPL offering with targeted consumer campaigns. In 2025, it plans to boost BNPL adoption in key international markets, including the UK, Germany, Australia, France, Italy and Spain. These efforts are expected to build on existing traction and further diversify PayPal's BNPL footprint beyond the United States.

Overall, PayPal’s BNPL initiatives are tightly woven into its transformation into a comprehensive commerce platform. By aligning BNPL with innovations in checkout, omnichannel capabilities and AI-powered personalization, PayPal is positioning itself not just as a payment processor but as a flexible, data-driven enabler of modern digital commerce.

How Are PayPal and Block Expanding in the BNPL Space?

Affirm Holdings, Inc. AFRM is expanding its BNPL business by strengthening long-term funding partnerships and diversifying capital sources. It extended its alliance with Moore Specialty Credit through 2027, securing continued support from a partner that has invested nearly $5 billion in its assets. Affirm also launched a $3 billion revolving loan facility with PGIM Fixed Income, enhancing funding flexibility, liquidity and scalability.

Block, Inc. XYZ is broadening its BNPL offerings via Afterpay by integrating installment payment features directly into the Cash App. This allows qualified users to manage BNPL transactions seamlessly within the app. Additionally, Afterpay has enhanced its merchant ecosystem by partnering with retailers like StitchFix, PetMeds and Mejuri, expanding Block’s reach at checkout.

PYPL’s Price Performance, Valuation and Estimates

Shares of PayPal have declined 13.7% year to date, underperforming both the broader industry as well as the S&P 500 Index.

From a valuation standpoint, PayPal shares are trading cheap, as suggested by the Value Score of B. In terms of forward 12-month P/E, PYPL stock is trading at 13.74X compared with the Zacks Financial Transaction Services industry’s 22.48X.

PayPal’s estimate revisions reflect a positive trend for the second quarter, as well as for the full year 2025 and 2026, though the same for the third quarter is not that impressive and is going south. The Zacks Consensus Estimate for 2025 earnings is pegged at $5.08 per share, suggesting 9.25% growth over 2024, while the same for 2026 stands at $5.64, calling for 11% growth year over year.

At present, PayPal 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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