PayPal Holdings, Inc. (NASDAQ:PYPL) is a strange company to look at today. A decade ago, PayPal was one of the defining names in digital payments. It helped make online checkout mainstream and built a network of hundreds of millions of consumers and millions of merchants. Then the market changed, competition intensified, and PayPal somehow went from being one of the most admired fintech companies to one investors largely stopped caring about.
The stock has fallen roughly 80% over the past five years. At about 9.07x forward earnings, the market is clearly not expecting a return to its old glory. But that is what makes PayPal interesting.
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The obvious turnaround catalyst is a recovery in branded checkout, where PayPal’s button appears when consumers pay online. The less obvious one could come from something much bigger: what happens when there isn’t a checkout button at all?
PayPal’s old problem needs to stop getting worse
Let’s start with the uncomfortable part.
PayPal’s core checkout business has been losing momentum for years. Apple Pay, Shop Pay and other alternatives have made online payments easier, while PayPal struggled to keep its consumer experience moving fast enough. The company’s branded checkout volume grew only 2% in the latest quarter, although management said it had stabilized for a second consecutive quarter.
That stabilization matters more than it might seem.
PayPal does not need to suddenly return to 20% growth. It needs to stop losing ground while its newer businesses get bigger.
And there are signs that this is happening.
Venmo’s payment volume grew 14%, Braintree, which processes payments for merchants behind the scenes, grew in the mid-teens, and PayPal’s financial services business is growing considerably faster than the company as a whole.
The company is also rebuilding itself around those businesses instead of treating them as side projects.
That is probably the most important part of the turnaround.
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The catalyst nobody is really paying for
PayPal’s new management is spending 2026 fixing the plumbing.
The company is simplifying its organization, modernizing its technology, and cutting at least $1.5 billion of annualized costs over the next two to three years. But management is not simply trying to turn those savings into higher profits. Much of the money is being redirected toward financial services, Venmo, Braintree, risk management, and new technology.
That is important because the real catalyst may not be cost savings.
It may be agentic commerce. Instead of a consumer visiting Amazon or another website, an AI assistant could search for a product, compare alternatives, and eventually make the purchase on the consumer’s behalf.
That could fundamentally change online checkout.
And PayPal Holdings, Inc. is already building for it. The company has launched tools that allow merchants to make their products discoverable to AI assistants and complete purchases through agent-driven experiences.
This is where PayPal’s old assets suddenly become interesting again.
It already has the payment infrastructure, merchant relationships, consumer identity, and fraud-management capabilities needed to sit between buyers, merchants, and AI agents.
Management does not expect agentic payments to materially contribute in the near term. In fact, Enrique Lores, President and CEO of PayPal, said the company expects these businesses to become increasingly meaningful from 2028 onward.
That may actually be a good thing for investors.
The market is being asked to value PayPal primarily on whether it can repair its existing business. It is not giving the company much credit for what happens if AI changes how commerce itself works.
The risk is that PayPal is a value trap
There is an obvious bear case.
AI commerce could take years to develop. Consumers may not trust AI agents to spend their money. Merchants may resist handing control of the customer relationship to an intermediary. Recent reporting also shows that some major retailers are already restricting AI agents rather than embracing them.
And PayPal still has to execute the much less glamorous part of the turnaround.
Its checkout business needs to stabilize. Venmo needs to become more profitable per customer. Braintree needs to keep moving toward higher-value services. Management needs to prove that its technology overhaul actually improves the customer experience.
There is plenty that can still go wrong.
The verdict
PayPal isn’t interesting simply because it trades at 9.07x forward earnings. Cheap companies can stay cheap for a very long time.
What makes it interesting is that the market seems to be judging PayPal primarily on its fading past while management is trying to build around businesses that could matter much more in the future.
The near-term catalyst is stabilization. The potentially much bigger catalyst is agentic commerce.
If PayPal can stop losing relevance at checkout and establish itself as the payment layer for a world where AI agents do the shopping, the company could look very different a few years from now.
At 9.07x forward earnings, investors are not paying much for that possibility.
Market Sentiment
Hedge fund sentiment toward PayPal weakened in the second quarter. According to Insider Monkey’s database, 60 hedge funds held the stock in Q2, down from 76 in Q1. The value of those positions also declined slightly, from about $1.22 billion to $1.21 billion. The drop in the number of funds suggests institutional investors have become somewhat less bullish on PayPal, even though the total value of their holdings remained relatively stable.
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This article is originally published at Insider Monkey.
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