PYPL Is Too Cheap And Will Reward Patient Shareholders
•February 6, 2026
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Why It Matters
A deep‑value play like PayPal offers potential multi‑digit returns if its share‑buyback driven upside materializes, challenging the prevailing momentum‑focused market narrative.
Key Takeaways
- •PayPal trades at ~7.6x earnings
- •$6B buyback could retire 16% of shares
- •Intrinsic value estimated around $60 per share
- •4Q25 TPV rose 8.5% to $475B
- •EPS rise stems from repurchases, not profit growth
Pulse Analysis
The current market environment heavily favors momentum strategies, leaving classic value opportunities largely ignored. PayPal’s stock, hovering near $40, reflects a 7.6‑times forward earnings multiple—well below peers and historical averages. This valuation gap is amplified by the company’s guidance of a low‑single‑digit EPS decline for 2026, suggesting earnings stability despite broader fintech headwinds. For investors accustomed to growth narratives, PayPal presents a rare quantitative discount anchored in tangible financial metrics.
Central to PayPal’s appeal is its aggressive share‑repurchase agenda. After spending $6 billion to retire 86 million shares in 2025, the firm plans another $6 billion buyback in 2026. At a $40 share price, that program could eliminate roughly 150 million shares, shrinking the diluted count from 939 million to about 789 million—a 16% reduction. This dilution mitigation directly lifts earnings per share and aligns the market price closer to an estimated intrinsic value of $60, derived from a $50 billion enterprise valuation divided by the post‑buyback share count.
For long‑term investors, the combination of a deep discount, robust cash flow, and a disciplined capital return strategy creates a compelling risk‑adjusted return profile. While PayPal’s growth metrics—8.5% TPV expansion and modest revenue gains—are modest, the firm’s cash generation supports continued buybacks without jeopardizing operations. The primary risk lies in sustained earnings pressure and competitive fintech dynamics, which could erode the intrinsic value premise. Nonetheless, the sizable upside potential positions PayPal as a strategic holding for patient capital seeking exposure to a financially sound, yet undervalued, payments platform.
PYPL Is Too Cheap And Will Reward Patient Shareholders
We live in an era of momentum investing. Value investing – especially deep value investing – is out of fashion. As a result, nobody is interested in PayPal (PYPL). But after Tuesday’s washout, the stock has simply gotten too cheap and will reward patient shareholders who can take a long term outlook.
PYPL closed Thursday at $39.90. They are guiding 2026 EPS to a low single digit decline to slightly positive from $5.31 in 2025. $5.25 seems like a conservative estimate. In other words, PYPL is trading for 7.6x earnings.
In addition, PYPL is aggressively buying back its shares. It spent $6 billion to buy back 86 million shares in 2025 and plans to spend another $6 billion in 2026 buying back shares. The essential point here is that if you do the math, PYPL paid ~$70/share in 2025. If the price stays around $40, it will be able to buyback 150 million shares for $6 billion in 2026. The diluted share count is currently 939 million. In other words, if the price stays where it is PYPL will retire 16% of its shares in the current year. That means the value of the business for each remaining share increases significantly.
Last, while it might not be a great business, it’s still a decent one. Total Payment Volume (TPV) increased 8.5% to $475 billion in 4Q25. Revenue increased 3.7% to $8.7 billion. EPS increased to $1.23 from $1.19 – but that’s only because they bought back so many shares. Net income actually decreased 4.5% to $1,155 million from $1,209 million in 4Q24.
Let’s put it all together now and come up with an intrinsic value. PYPL’s Non-GAAP net income was $5,142 million in 2025. Even if it’s on a steady decline like a cigar butt, that’s a lot of money. I think the business is worth ~$50 billion. If they’re able to buy back 150 million shares this year, that would put the diluted share count at 789 million at the end of the year. $50 billion divided by 789 million shares works out $63/share. To be conservative, let’s put intrinsic value at $60/share. Almost any way you look at it, PYPL is trading at a substantial discount to intrinsic value.
In conclusion, PYPL is a Ben Graham-style, quantitatively cheap, low to medium quality stock. It is the kind of stock that investors in the current market have little interest in. But given its substantial discount to intrinsic value, it is likely to significantly reward patient investors with a long term outlook from current levels.
Disclosure: Top Gun is long PYPL.
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