PayPal: Undervalued Growth Opportunity in Online Payments
PayPal, a longstanding leader in online shopping security, is drawing attention for its relatively affordable valuation compared to peers. With a strong focus on international expansion and diversifying revenue streams, the company is poised for growth.
PayPal's valuation, with an EV/EBITDA of 10.25 and a P/E GAAP of 14.54, is relatively cheap compared to competitors like Visa and Adyen. This is despite the company's robust performance and growth.
PayPal has been a mainstay in online shopping for decades, facilitating secure transactions between individuals and businesses. Its revenue has grown at a CAGR of 6.96% over the past three years, with net income increasing by 31.54% in the same period. The company's success is underpinned by its transaction services, which account for over 90% of its total sales, generating $29.1B in the last twelve months.
PayPal is not resting on its laurels. It has expanded internationally with Fastlane, an accelerated checkout solution, and committed $100MM to foster digital growth in the Middle East and Africa. Additionally, other value-added services have doubled since 2020, reaching $3.2B in revenue. This diversification is crucial as PayPal transitions towards a balance sheet-light model for its buy now, pay later (BNPL) offerings.
In line with this transition, PayPal sold its European BNPL loan portfolio to KKR in 2023, valued at around €40B. More recently, on September 17, 2025, Blue Owl Capital acquired $7 billion of PayPal's BNPL receivables. These moves allow PayPal to focus on its core competencies while still benefiting from the BNPL market.
PayPal's affordable valuation, strong transaction services, and strategic expansion make it an attractive investment. With a total payment volume of over $1.72T and a conversion rate of over 90%, the company is well-positioned to continue its growth trajectory. Its transition to a balance sheet-light model for BNPL further enhances its financial flexibility.
