Since the new CEO took over, the digital payments powerhouse has made progress driving profitable growth.
Despite having a strong brand and benefiting from a network effect, competition in the industry is fierce.
Still, shares trade at a dirt cheap valuation, which gives investors tremendous upside potential.
Earnings season is in full swing. While the barrage of information can be overwhelming, the fresh financial updates that executive teams provide can give investors a much-needed glimpse into how certain businesses are performing. If you’re eyeing a company, it’s worth paying close attention.
Consider one leading payments enterprise, which just reported financial results for the first quarter of 2025. The numbers were mixed, with revenue that disappointed Wall Street and earnings per share (EPS) that beat expectations. Nonetheless, shares are down a troubling 24% in 2025 (as of April 29).
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Should invest buy this cheap stock right now and hold it for the long term?
During the three-month period that ended March 31, PayPal(NASDAQ: PYPL) posted $7.8 billion in revenue, up just 1% year over year. This gain, while small, was supported by 1.5 million net new accounts, bringing the total to 436 million. And it’s worth highlighting PayPal’s monster total payment volume (TPV) of $417 billion, which was 3% higher than Q1 2024.
PayPal has multiple segments. However, Venmo is the current star of the show. The peer-to-peer app registered 20% revenue growth, with TPV increasing 10% to $76 billion.
While the top-line growth wasn’t anything to get excited about, the business is making great strides further down the income statement as profitability is improving dramatically. “PayPal had a great start to the year, and our strategy is working,” CEO Alex Chriss said. “This is our fifth consecutive quarter of profitable growth with progress across branded checkout, PSP, omnichannel, and Venmo.”
Diluted EPS surged 56% from the first quarter of 2024. PayPal’s operating expenses declined 4% year over year, demonstrating cost discipline. Guidance calls for EPS growth of 20% to 24% for the full year.
PayPal has been pioneering digital payments and online commerce solutions for over two decades. This makes it a leader in the industry and has led to durable competitive advantages. PayPal’s brand is held in high regard, known for trust, security, convenience, and innovation in the eyes of both merchants and consumers looking to move money around. When dealing with finances, this matters.
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And by running a two-sided ecosystem, PayPal benefits from a network effect. Merchants are drawn to the platform because of the massive consumer base. Individuals want to use PayPal because of how widely accepted it is. As the network expands, it becomes more valuable.
But competition in the industry is fierce. Apple Pay and Block‘s Cash App might be giving PayPal the biggest headaches on the consumer front. When it comes to merchants, PayPal’s Braintree has to compete with ShopifyBlock’s Square, Adyenand Stripe. Customers not only want reasonable pricing, but they likely also care about having a deep set of products and services.
Investors must keep tabs on developments happening in the industry. It’s important to not only know what strategic moves PayPal is undertaking, but also what rivals are doing that can have an impact on the competitive environment.
PayPal’s business appears to be on solid footing. The leadership team doesn’t want to grow at any cost. Instead, there’s a steady approach to supporting expansion in a profitable manner. What’s more, PayPal has competitive strengths that solidify its position as a leader in the crowded payments landscape.
Despite what appear to be very positive attributes, the market isn’t convinced. As of this writing, the fintech stock trades at a stomach-turning 79% below its peak, driven by a 24% decline just in 2025 alone. Yet, the shares trade at a forward P/E multiple of just 13.2. For risk-tolerant investors, this valuation might be too hard to pass up, making PayPal a legitimate investment candidate for the long term.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adyen, Apple, Block, PayPal, and Shopify. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short June 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.
Down 24% in 2025, Should You Buy This Cheap Stock and Hold for the Long Term? was originally published by The Motley Fool
