Is PayPal Stock Too Cheap to Ignore?

With artificial intelligence (AI) stocks soaring this year, driving strong market gains, you can miss the ones that aren't participating in the rally. PayPal (NASDAQ: PYPL) has been underperforming for years already, despite being one of the most important players in digital payments. It's now down 86% from its all-time high and trading at only 9 times trailing 12-month sales.

Is PayPal stock too cheap to ignore?

Reinventing PayPal's business

PayPal has lost steam over the past few years as competitors have been more agile and innovated quickly. It's cycled through several CEOs, and Enrique Lores recently moved over from HP to take the reins. While he's considered a solid, experienced leader, the stock fell on the news in February. It just seemed like another signal of uncertainty at the company; it had only been two years since the previous CEO said he was going to turn the company around.

Image source: Getty Images.

Lores admitted that PayPal spent several years underinvesting, which allowed competitors to break through. He plans to reorganize the company into three divisions for greater clarity and expects improved performance across all of them. These include checkout, consumer financial services, and payment services.

Consumer financial services is the most interesting one, since it's not PayPal's bread and butter; instead, it's a leader in checkout and payments. Lores plans to expand PayPal's consumer side to become a partner in users' total financial management, automatically increasing its value on the merchant side. Lores noted that people have moved to digital services to manage their finances, and that this represents a large market opportunity of $200 billion in its top six markets alone. It's also growing by double digits.

He also plans to lean into AI for better cost efficiency, and the company has already announced a round of layoffs, up to 20% of its staff.

Can PayPal stock make a comeback?

As Lores noted, PayPal has a lot going for it in its brand, technology, and leadership position. It processed $464 billion in volume in the fourth quarter, an impressive 11% increase over the prior-year quarter. Revenue increased 7% year over year, and adjusted earnings per share (EPS) were roughly flat at $1.34. Transaction margin dollars were up 3%. However, it's guiding for a 3% drop in transaction margin dollars and a 9% drop in EPS for the year.

That's what to be confident about, but it's a big question mark right now. Even if the new plan works, it's going to take time to show up. That's why the stock has dropped so low. It now trades at only 9 times trailing 12-month sales, just above its all-time low of 7 a few weeks ago.

Does this mean PayPal can only go up from here? Not necessarily. It could continue to slump, so even at this price, it's not a no-brainer bargain.

Jennifer Saibil 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: short June 2026 $50 calls on PayPal. The Motley Fool has a disclosure policy.