PayPal (PYPL) Valuation Update Following Q3 Earnings Beat, First Dividend, and AI Partnerships

PayPal Holdings (PYPL) jumped after delivering Q3 results that beat expectations, issuing its first dividend, and expanding buybacks, while also raising full-year guidance. New AI commerce partnerships with OpenAI and Google spotlight the company’s focus on innovation.

See our latest analysis for PayPal Holdings.

After a period of sluggish performance, PayPal has reignited investor optimism with upbeat Q3 results, a new OpenAI partnership, and a first-ever dividend. However, its 1-year total shareholder return is still down 14%, and the stock remains well below past highs. Momentum appears to be stabilizing as recent innovations and capital returns signal a more confident long-term outlook. The year-to-date share price return of -21% is a reminder that the company still has ground to make up from its pandemic peak.

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Despite recent gains and a surge in innovative partnerships, PayPal's shares still trade at a significant discount to analyst targets. Is the market missing the turnaround story, or is future growth already reflected in the current price?

Most Popular Narrative: 35.5% Undervalued

PayPal's fair value is pegged at $105.25, significantly above the last close at $67.93. Momentum has shifted; however, this bold narrative hinges on the company’s power plays in digital wallet connectivity and new merchant services.

Venmo is a very popular app/tool that people are using all over. One thing that they/past management had issues with was how to monetize it. Slowly, besides transaction fees and earning interest off of customers' unused cash, they have started to add a debit and a credit card into the mix. Along with that—what I am most bullish on—is how they are having Venmo being able to be used in stores. I mean, even the other day when I was on DoorDash I noticed that Venmo is now an option to use for payment. They already made a very simple process begin to spread into the merchant business, which I believe will bring in a lot of revenue while raising profit margins.

Read the complete narrative.

Want to know what drives this outsized fair value? Discover how expanding profit margins and new merchant solutions factor into these numbers. See what surprising growth targets underlie these bullish forecasts. The outlook may defy recent price action, but understanding the full narrative could change your view on PayPal’s upside.

Result: Fair Value of $105.25 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, slowing revenue growth and further share price declines could challenge PayPal’s turnaround story. Recent optimism may be vulnerable if execution slips.

Find out about the key risks to this PayPal Holdings narrative.

Build Your Own PayPal Holdings Narrative

If you see things differently or prefer hands-on research, you can craft your own PayPal Holdings story in just a few minutes. Do it your way.

A good starting point is our analysis highlighting 5 key rewards investors are optimistic about regarding PayPal Holdings.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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