PYPL: AI Commerce Partnerships Will Drive Future Upside Potential

Analysts have modestly raised their price target on PayPal Holdings to a range of about $80 to $100 per share, reflecting greater confidence in accelerating revenue growth, improving contributions from unbranded processing and Buy Now, Pay Later, and new AI driven partnerships, even as they temper expectations for near term profitability and valuation multiples.

Analyst Commentary

Recent research commentary reflects a more constructive stance on PayPal, with several bullish analysts raising price targets into the high $70s to low $100s as execution improves across core and newer initiatives. At the same time, more cautious voices highlight structural and cyclical headwinds that could limit multiple expansion and constrain upside to earnings growth.

Bullish Takeaways

Bullish analysts point to another quarter of steady operational progress, viewing the ongoing business refocus under new leadership as strengthening PayPal's long term growth algorithm and supporting higher valuation ranges.
Improving profitability from the unbranded processing business, alongside continued outsized growth in Buy Now, Pay Later and better Venmo contribution, is seen as evidence that mix and margin pressures are easing and could drive more durable earnings growth.
Acceleration in branded total payment volume, particularly in U.S. online checkout, is interpreted as an early sign that strategic initiatives are beginning to reenergize the core franchise, a key requirement for sustaining multiple expansion.
New AI driven partnerships, including integrations into leading conversational platforms and broader collaborations around artificial intelligence shopping experiences, are viewed as creating incremental monetization channels and reinforcing PayPal's global distribution advantages.

Bearish Takeaways

Bearish analysts remain concerned about transaction margin headwinds in 2026, citing interest rate normalization and tougher comparisons in credit products, which could cap earnings growth and weigh on the stock's relative valuation.
There is lingering skepticism around the visibility and pace of a sustained reacceleration in branded checkout, with softer trends in key European markets, ongoing tariff disruptions in the U.S., and intensifying competition from alternative digital wallets raising execution risk.
Commentary about a more cautious consumer environment, including smaller basket sizes late in the quarter, feeds worries that macro softness could limit near term revenue upside and justify more conservative valuation multiples.
Some observers view recent AI and big tech partnerships as strategically important but unlikely to materially move the financial needle in the near term, reinforcing a Neutral stance while they wait for clearer proof that these initiatives can drive incremental growth at scale.

What's in the News

PayPal signed an agreement with OpenAI to make PayPal the first embedded payments wallet in ChatGPT, enabling buyers and sellers to complete transactions within the AI tool starting next year, with full PayPal buyer protections (CNBC).
PayPal launched agentic commerce services to connect merchant catalogs and payments to AI-driven shopping channels, including Perplexity, with capabilities such as agent ready payments and store sync planned to roll out through 2026.
Wix, BigCommerce and other ecommerce platforms announced strategic collaborations with PayPal to use its agentic commerce services, allowing merchants to sync product data into AI discovery environments and accept PayPal powered checkout directly in those interfaces.
Newegg and Ashley rolled out fully transactional shopping experiences through Perplexity using PayPal payments, letting consumers move from AI powered product discovery to in channel checkout while the retailers remain merchants of record.
PayPal expanded its balance sheet light model in buy now, pay later through new agreements under which KKR and Blue Owl funds will purchase up to about €65 billion in European BNPL receivables and approximately $7 billion of U.S. Pay in 4 receivables.

Valuation Changes

The fair value estimate has edged down slightly from about $82.22 to $82.00 per share, reflecting modestly lower long-term profitability assumptions despite stronger growth inputs.
The discount rate has declined marginally from approximately 7.76 percent to 7.73 percent, implying a slightly lower required return and modest support for valuation.
Revenue growth has risen meaningfully from roughly 6.30 percent to 7.50 percent, signaling improved expectations for PayPal's top-line expansion over the forecast horizon.
The net profit margin has ticked down slightly from about 14.76 percent to 14.55 percent, incorporating somewhat higher cost or mix-related pressure in the earnings outlook.
The future P/E multiple has been reduced from around 14.8x to 13.7x, indicating a more conservative view on the valuation investors are likely to assign to PayPal's forward earnings.

PayPal's transformation into a commerce platform and smart wallet introduction could enhance revenue and improve merchant relationships.
Expanded branded experiences, BNPL rollout, and value-added services are driving transaction volume, margin, and earnings growth.
Macroeconomic uncertainty, competition, and regulatory changes could hinder PayPal's revenue growth and cross-border transactions amidst challenges in key markets.

Catalysts

About PayPal Holdings

Operates a technology platform that enables digital payments for merchants and consumers worldwide.What are the underlying business or industry changes driving this perspective?

PayPal is transforming from a payments company to a commerce platform, focusing on personalized experiences and leveraging vast data. This strategic shift could drive future revenue growth as it taps into broader commerce opportunities beyond traditional payment processing.
The introduction of a dynamic smart wallet, enabling consumers to make optimal payment choices, supports PayPal's transition to an end-to-end commerce partner, potentially impacting net margins positively as it deepens relationships with merchants and boosts transaction volumes.
PayPal's branded experiences and omnichannel initiatives, which include expanding Venmo and PayPal debit card usage, are accelerating TPV growth; these developments are likely to enhance revenue and improve earnings due to increased consumer engagement and frequency of use.
The rollout of Buy Now, Pay Later (BNPL) and intensified marketing efforts in Europe and key markets may bolster transaction volume and revenue, especially as BNPL users tend to spend more, contributing to mid
and long-term revenue growth and margin improvement.
PayPal's focus on value-added services such as optimized debit routing and fraud protection are generating higher transaction margins, which is expected to continue bolstering earnings growth by shifting volume to more profitable avenues while improving service offerings to large and small merchants.

PayPal Holdings Earnings and Revenue Growth

PayPal Holdings Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming PayPal Holdings's revenue will grow by 5.6% annually over the next 3 years.
Analysts assume that profit margins will shrink from 14.5% today to 14.2% in 3 years time.
Analysts expect earnings to reach $5.4 billion (and earnings per share of $6.32) by about September 2028, up from $4.7 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $6.1 billion in earnings, and the most bearish expecting $4.8 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.8x on those 2028 earnings, up from 13.8x today. This future PE is lower than the current PE for the US Diversified Financial industry at 16.5x.
Analysts expect the number of shares outstanding to decline by 4.7% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.83%, as per the Simply Wall St company report.

PayPal Holdings Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The macroeconomic uncertainty, tariffs, and geopolitical issues could impact consumer spending, supply chains, and PayPal's revenue growth.
The shift away from unprofitable Braintree volume, while positive for transaction margins, may dampen gross revenue growth.
Regulatory changes, such as tariff exemptions with China, could impact cross-border transaction volumes and negatively affect branded checkout TPV.
Competition in key markets like the UK may challenge PayPal's ability to gain market share and maintain revenue growth.
Changes in foreign currency exchange rates could have an unpredictable effect on PayPal's cross-border transaction revenues.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $82.522 for PayPal Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $120.0, and the most bearish reporting a price target of just $62.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $38.1 billion, earnings will come to $5.4 billion, and it would be trading on a PE ratio of 15.8x, assuming you use a discount rate of 7.8%.
Given the current share price of $67.68, the analyst price target of $82.52 is 18.0% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.