Down 85%, Should You Buy the Dip on PayPal Stock in March?
Key Points
Investors have punished PayPal shares because the company’s growth has slowed dramatically from the pandemic years.
A strong financial position and a network effect are two valuable traits the business possesses.
Unless growth accelerates soon, the market will likely continue assigning a low valuation to this fintech stock.
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There are many companies that operate in the digital payments industry. Founded in 1998, PayPal (NASDAQ: PYPL) is one of the pioneers in the sector, with a huge platform and well-known brand name. However, that positioning hasn't resulted in a winning outcome for investors in recent years.
As of March 11, this fintech stock trades 85% below its all-time high, which was established almost five years ago in July 2021. Does this setup make PayPal a convincing buy-the-dip candidate in the month of March?
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Image source: PayPal.
The market cares a lot about growth
All else equal, the investment community appreciates companies that exhibit faster growth than those that post smaller gains. PayPal once fell into that former bucket. Its growth during the depths of the pandemic was eye-popping, as it was processing surging payment volumes and signing up a huge number of new accounts amid the lockdowns. The stock was a big winner.
But when things change for the worse, it can really disappoint the market. In recent years, PayPal's growth slowed dramatically as the lockdowns ended. Investors are coming to terms with the fact that this could be the company's new reality, given the intense nature of competition these days.
PayPal ended 2025 with 439 million active accounts. That figure was up by just 13 million compared to exactly five years before. Revenue last year increased 4%. And the flagship branded checkout solution reported payment volume in Q4 that was up only 1% year over year, down from 6% growth in the year-ago quarter. Because this deceleration occurred during the key holiday shopping period, it's understandable why the market was so pessimistic.
Investors were also caught off guard by the leadership change. Enrique Lores, formerly chief executive officer of HP, replaced Alex Chriss on March 1.
PayPal still has some favorable traits
For what it's worth, PayPal is in strong financial shape. It produced $5.6 billion in free cash flow last year. And as of Dec. 31, it had $14.8 billion in cash, cash equivalents, and investments on the balance sheet, compared to $11.6 billion in debt.
The business possesses a scaled network effect. Its platform consists of both merchants and individual consumers. Both stakeholders benefit as the number of users increases. It's a positive feedback loop.
Given these attributes, it's understandable why private fintech business Stripe is interested in acquiring all or part of PayPal.
The stock might be cheap for a reason
Right now, investors can buy shares in this payments enterprise at a cheap forward price-to-earnings ratio of 8.4. This setup can be quite attractive for value investors.
But I believe the stock is deserving of this low valuation. There's no reason for investors to believe that the company's growth will accelerate, which is precisely what I think is needed to drive valuation expansion. Even though the shares are down so much, PayPal is not a buy-the-dip candidate.
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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