PayPal Holdings, Inc. (PYPL): A Bull Case Theory 

We came across a bullish thesis on PayPal Holdings, Inc. on CompoundingLab’s Substack. In this article, we will summarize the bulls’ thesis on PYPL. PayPal Holdings, Inc.’s share was trading at $54.08 as of January 28th. PYPL’s trailing and forward P/E were 11.15 and 9.59 respectively according to Yahoo Finance.

PayPal Holdings, Inc. operates a technology platform that enables digital payments for merchants and consumers worldwide. PYPL presents a compelling investment opportunity driven by its strategic pivot under CEO Alex Chriss and a significant market mispricing relative to intrinsic value. The company currently trades at a 29% discount to its DCF-based fair value, suggesting that buybacks and margin normalization could generate roughly 12% annual alpha as valuation reverts to the mean.

Key growth initiatives include Fastlane by PayPal, a one-click guest checkout enhancing merchant conversion rates and competing with Apple Pay and Shopify; unbranded processing via Braintree, which drives high-volume payments for clients like Uber and Airbnb; monetization of Venmo through debit cards, business profiles, and retail integrations; and expansion into small and medium businesses with PayPal Open, a unified payments, credit, and risk management platform. The DCF model assumes conservative explicit growth of 6–4% over ten years, reflecting historical consistency—PayPal has never experienced revenue decline in the past decade, contrasting with peers such as Block.

Long-term growth is projected at 2.6%, with a WACC of 9.4%, a 10x EBITDA exit multiple, a 21% tax rate, and reinvestment based on a 1.1 Sales-to-Capital ratio. The bull case emphasizes PayPal’s strong free cash flow, self-correcting valuation, underappreciated margin recovery, and improved user experience from platform simplification.

While growth may not be explosive, the market has over-discounted risk, leaving a favorable entry point. Overall, PayPal’s combination of discounted valuation, strategic initiatives, and resilient financial profile supports maintaining a modest position of 2–3% of a diversified portfolio, offering attractive upside potential as its strategy execution and margin recovery play out.

Previously, we covered a bullish thesis on PayPal Holdings, Inc. (PYPL) by Sergey in May 2025, which highlighted the company’s strong first-quarter execution, AI integration, Venmo and BNPL momentum, and strategic expansion in SMB and offline commerce. PYPL’s stock price has depreciated by approximately 18.45% since our coverage due to market concerns over slower margin expansion. CompoundingLab shares a similar perspective but emphasizes the DCF-based upside, framing buybacks and margin normalization as key drivers for potential alpha.

PayPal Holdings, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 86 hedge fund portfolios held PYPL at the end of the third quarter which was 89 in the previous quarter. While we acknowledge the risk and potential of PYPL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PYPL and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.