Is PayPal Stock a Buy at Less Than 10 Times Next Year's Earnings Guidance?

It's not too tough to figure out why shares of payment middleman PayPal (NASDAQ: PYPL) have struggled since peaking in 2021. The company's dominance of the online payment space at the start of the COVID-19 pandemic positioned it perfectly for the surge in e-commerce the pandemic would spur.

In the meantime, alternatives like Stripe and Wise became more popular, as did Alphabet's Google Pay and Apple Pay. PayPal stock is now more than 80% below its 2021 high, and still within sight of February's multiyear low.

The sellers, however, have arguably overshot their target. While the company's best days are behind it, this ticker is undervalued for a handful of reasons.

Image source: Getty Images.

PayPal's still making forward progress

Not all cheap stocks are necessarily worth buying. But with PYPL priced at less than 10 times next year's projected consensus per-share profit of $5.77, the crowd is arguably looking past a couple of important details here.

Chief among those details is the modest growth that PayPal is still experiencing. While its double-digit growth era may be in the rearview mirror, its second-quarter revenue still improved 3% year over year (on a currency-neutral basis), driven by an 8% year-over-year improvement in total transactions and 10% growth in total payment volume.

Although earnings were down slightly, mostly due to higher transaction expenses, PayPal still upped its full-year profit guidance from its previous outlook offered in May. That progress is expected to translate into top-line growth of over 4% next year, and earnings growth of more than 7%.

Perhaps the most compelling detail of Q2's results still not reflected in the stock's price, however, is how profitable PayPal remains despite competitive headwinds. Through the first half of 2026, the company turned $17 billion in revenue into net income of $2.2 billion. That's a net margin of nearly 13%, supporting continued value creation through ongoing stock buybacks. In this vein, PayPal has repurchased nearly 10% of its outstanding stock over the past 12 months.

Something solid to build on

PayPal's got a compelling past and present, and there's reason for optimism about the future. But is there enough bullish hope here to step into this deeply discounted stock?

Arguably yes, although not quite for the reason you might think.

PayPal isn't priced like a growth stock, simply because it's no longer one. It's now a value name, and while it's still cheap, even by value-stock standards, as noted, it's not difficult to understand investors' general disinterest in owning this ticker at this time.

What most of this crowd is overlooking is that 439 million PayPal accounts are still active, with 228 million of those customers using them at least once per month. That's a modest improvement on the same metrics from a year earlier, which were also up from mid-2024 levels. If nothing else, the company is proving it can still win and keep customers, even if not at a heroic pace. From here, it's just a matter of figuring out how to enhance the numbers, which its transformation plan is doing.

Just be sure to keep your expectations in check.

James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Apple, and PayPal. The Motley Fool recommends the following options: short December 2026 $62.50 calls on PayPal. The Motley Fool has a disclosure policy.