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First of all: I am not invested in PayPal yet, but the ongoing discussions about it motivated me to take a closer look and write down my thoughts. First, here are the 10K figures from recent years:
|Year|Revenue|Operating income|Net income|Net income change|
|:-|:-|:-|:-|:-|
|2022|27.51 bn|3.83 bn|2.419 bn|\-42%|
|2023|29.77 bn|5.02 bn|4.246 bn|\+75%|
|2024|31.79 bn|5.32 bn|4.147 bn|\-2%|
|2025|33.17 bn|6.06 bn|5.233 bn|\+26%|
If we use a simple fair value calculation assuming a risk premium of 10% and an expected net income growth rate of a) -3% b) 0% c) +3% per year for the next 5 years we get
a) Intrinsic value per share for -3% growth: $45.87
b) Intrinsic value per share for 0% growth: $60.29
c) Intrinsic value per share for +3% growth: $81.08
The stock price is currently $40.29, so even if PayPal does not grow over the next few years, the company is undervalued by almost 50% compared to its fair value, **it is right now even undervalued if the net income slightly decreases**. Okay we know that already, it was discussed over and over again, so what is new, is it a value trap, the next Kodak?
What's bad:
Paypal is integrated into over 30 million websites compared to \~2.5 million for Apple Pay and under 1 million for the Google Pay button. However, Apple and Google Pay are showing massive growth, and if the trend continues, they will gradually eat into PayPal's market share. On top of that PayPal plays virtually no role in Asia, which is dominated by Alipay and WeChat, and there are no signs that PayPal will be able to gain market share here so no growth to be expected in "emerging markets". From a market share perspective, the outlook is bad.
What's good:
"Buy Now, Pay Later" is popular, Klarna takes PayPal customers away at checkout; all it takes is one click on the "wrong" button. However, Klarna and other new payment providers first have to be integrated by merchants, while PayPal is already active on 30 million sites, which is a massive competitive advantage over new providers. PayPal also offers BNPL features, so it's easy for merchants to switch. In addition, Venmo is integrated in popular sites (DoorDash, Lululemon) and it's one of the most popular payment up for Gen Z and Millennials and the younger the target group, the more willing they are to spend money. And beside this, the data on who spends money on what is incredibly valuable, Visa and Mastercard make millions by selling credit card transaction data to market researchers and hedge funds.
What's promising:
The big question is: What does the future of purchasing goods look like? On which platform will products primarily be found, and which payment method will be used? Surprisingly, **AI platforms have been largely overlooked by the market as future points of sale**, even though it is only logical: If I search ChatGPT and Gemini for recommendations for e.g. a remedy for a sore throat and can also purchase a product directly on the platform without having to switch to another website, most users will simply do this. And how do people pay then? Well, there is the *Agentic Commerce Protocol (ACP)*, a solution built by OpenAI and Stripe to directly integrate product recommendations and purchase options into the AI platform. And beside Stripe Paypal is adopting ACP too: [Press Release: OpenAI and PayPal Team Up to Power Instant Checkout and Agentic Commerce in ChatGPT - Oct 28, 2025](https://newsroom.paypal-corp.com/2025-10-28-OpenAI-and-PayPal-Team-Up-to-Power-Instant-Checkout-and-Agentic-Commerce-in-ChatGPT). If the theory holds true that users will spend much more time on AI chat platforms in the future and bots will also make purchases autonomously, Stripe and PayPal are in excellent positions. Of course, Google will route Gemini users to Google Pay, but OpenAI will be interested in offering its checkout platform agnostically. And ultimately, it's also a bet on how well PayPal can establish itself as the leading AI payment processor, because they won't be the only ones pushing into this direction.