We recently published a list of 10 Most Undervalued S&P 500 Stocks to Buy Now. In this article, we are going to take a look at where PayPal Holdings, Inc. (NASDAQ:PYPL) stands against other undervalued S&P 500 stocks to buy now.
Earlier on March 13, Michael Cuggino, President and Portfolio Manager of the Permanent Portfolio Family of Funds, appeared on CNBC’s ‘The Exchange’ and began discussing his fund’s performance. Despite a challenging market environment, his fund achieved a 4% return this year, which he attributed to diversification rather than reliance on a single asset class like gold. The portfolio includes gold, silver, diversified equities, and bonds. When asked about market reactions to tariff-related headlines, Cuggino emphasized the importance of not overreacting to daily news fluctuations. He described the market’s behavior as herky-jerky and advised investors to focus on long-term opportunities rather than reacting impulsively. His base case anticipated some turbulence due to the transition under the new administration’s economic policies. His strategy involves identifying opportunities during volatile periods rather than making significant portfolio changes.
The discussion also featured David Zervos, Chief Market Strategist at Jefferies, who provided insights on Washington’s role in market volatility. Zervos acknowledged that while policies such as tariffs, immigration reforms, and drug policies were largely unfolding as expected, the speed of changes under the current administration was surprising investors. He pointed out rapid spending cuts and layoffs in the public sector as key contributors to market unease. For instance, courts recently ordered the federal government to rehire probationary employees who had been dismissed. Zervos likened this abrupt shift to transitioning from a public-sector-reliant economy to one driven by the private sector, which is a process that has introduced significant uncertainty. Regarding tariffs specifically, Zervos downplayed their overall impact on the US economy, which he described as domestically driven. While tariffs could affect specific industries like wine or automobiles with high overseas components, he argued that broader economic trends would be shaped by deregulation, reduced business costs, and a shift toward private-sector efficiency. He warned that the speed of these transitions could lead to short-term volatility but maintained optimism about long-term productivity gains.
Methodology
We used the Finviz stock screener to compile a list of the top S&P 500 stocks that had a forward P/E ratio under 15. We then selected the 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 1000 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An engineer offering a demonstration of the ultra-low power FPGA technology.
PayPal Holdings, Inc. (NASDAQ:PYPL)
Forward P/E Ratio as of March 14: 13.39
Number of Hedge Fund Holders: 94
PayPal Holdings, Inc. (NASDAQ:PYPL) provides a technology platform for digital payments. It connects merchants and consumers and offers services under brands like PayPal, Venmo, and Braintree. It facilitates online and in-person transactions, fund transfers, and utilizes various funding sources, which include bank accounts, credit cards, and cryptocurrencies.
The company’s core growth engine in 2024 was its branded checkout segment, which saw consistent quarterly growth in transaction margin dollars, with an acceleration in US growth during Q4 2024. Upgraded checkout experiences, now live for over 25% of US traffic, reduced latency by 40% and boosted conversion rates by 1%. The Buy Now, Pay Later (BNPL) segment was also a major contributor, with $33 billion in total payment volume, which marked a 21% year-over-year increase. BNPL users spend 30% more on average. Fastlane, which is the company’s streamlined checkout feature, reached nearly 2,000 merchants, and attracted 75% new or re-engaged PayPal users.
For 2025, PayPal Holdings, Inc.’s (NASDAQ:PYPL) priority is scaling adoption of these innovations. It will expand globally and deepen merchant partnerships, while also growing its omnichannel presence with PayPal Everywhere.
Longleaf Partners Fund attributed the company’s strong performance to its improved leadership, cost management, and share buybacks, which led to significant FCF growth. It stated the following regarding PayPal Holdings, Inc. (NASDAQ:PYPL) in its Q4 2024 investor letter:
“PayPal Holdings, Inc. (NASDAQ:PYPL) – Digital payments platform PayPal was a contributor for the quarter and the year. The company delivered strong results, with gross margin dollars continuing to grow in the mid-high single digits for the last few quarters. Effective cost management further contributed to double-digit FCF growth, a key metric in our analysis. PayPal also demonstrated its commitment to enhancing shareholder value by repurchasing shares at a 10% annualized basis in the most recent quarter, leading to even stronger FCF per share growth. Much of what we envisioned at our initial investment has materialized quicker than anticipated. This strong performance has been driven by the improved leadership of relatively new CEO Alex Chriss.”
Overall, PYPL ranks 6th on our list of the most undervalued S&P 500 stocks to buy now. While we acknowledge the growth potential of PYPL as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PYPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires
Disclosure: None. This article is originally published at Insider Monkey.