Bear Market Sell-Off: Is PayPal Stock a Buy After Its 20% Plunge?
Key Points
A surprising CEO change and weak profit forecast tanked this fintech stock.
The bulls will focus on PayPal's network effect and cheap valuation.
There’s no reason to believe the business can accelerate growth, which will damp market sentiment.
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Just when investors thought that things couldn't get any worse, the market surprised them. PayPal (NASDAQ: PYPL), once a booming player in the digital payments space, is crashing again. After it reported fourth-quarter 2025 financial results, the share price immediately plunged 20%. It's down 30% this year (as of Feb. 17), while trading about 87% below its record.
This fintech stock lives in bear market territory. Should investors buy PayPal now?
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Image source: PayPal.
Adding fuel to the fire
When PayPal reported its latest results, there were likely two key developments that led the investment community to worry.
The first is that the business is bringing in Enrique Lores, chief executive officer at HP since November 2019 and a member of PayPal's board of directors since June 2021, as new CEO. This was a huge surprise, as there was no talk of a potential leadership change. Alex Chriss, PayPal's CEO since September 2023, is stepping down at the end of this month after 2 1/2 years leading the company.
Investors weren't happy with the company's outlook, either. PayPal provided a forecast of adjusted earnings per share to come in at a "low-single digit decline to slightly positive" in 2026. Sell-side analysts were looking for an 8% gain.
Bullish investors will focus on the positives
Despite PayPal's stock tanking, there are some positive factors to keep in mind.
As a two-sided payment platform with 231 million monthly active accounts that include merchants and consumers, PayPal benefits from a network effect. To be clear, though, this is a common trait in the payments industry. However, the business does have a solid competitive position, and there is a notable value proposition for its user base.
PayPal generates sizable free cash flow, totaling $5.6 billion in 2025. Management focuses on stock buybacks as a staple of its capital allocation policy, with plans to repurchase $6 billion worth of shares this year. With the valuation so low, as the stock trades at a beaten-down price-to-earnings ratio of 7.5, this could be a good move by the leadership team.
Are PayPal's best days behind it?
It's really challenging to be optimistic about PayPal right now, though. That's why I don't believe investors should take a chance on the stock.
Alex Chriss was doing the right things, like emphasizing product innovation and driving operational efficiencies. But this didn't help to accelerate growth. There's no reason to believe the new CEO can be successful in this regard, especially since there's so much competition in the payments industry these days.
Unless revenue can start to increase at a faster clip, and engagement can pick up, it will be extremely difficult for market sentiment to turn positive.
Should you buy stock in PayPal right now?
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends HP and PayPal. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short March 2026 $65 calls on PayPal. The Motley Fool has a disclosure policy.
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