PayPal: Unattractive Given Far Better Opportunities (Rating Downgrade)


  • I had a ‘Neutral/Hold’ view on PayPal stock, but was able to capture +2.57% of alpha from a tactical bullish play since my update. Now, I am downgrading my stance.
  • PayPal’s quality of growth continues to be weak as it fails to grow active accounts. Consumer surveys suggest loss of user share.
  • Q1 FY24 gross margins saw a 100bps decline, but I expect future quarters to be worse in the absence of certain tailwinds.
  • There have been a couple of notable insiders, each selling ~25% of their stake in PayPal.
  • PayPal needs to grow 4x faster to match the attractiveness of NVIDIA, considering a combination of valuation and growth expectations.

:Silhouette of upset Australian woman over PayPal logo


Performance Assessment

In my last article on PayPal (NASDAQ:PYPL), I had initially issued a ‘Neutral/Hold’ rating to reflect my expectation of performance in-line with the S&P 500 (SPY) (SPX). However, for a brief

Metric PayPal NVIDIA
1-yr fwd PE 14.7x 54.3x

Growth expectation

51% 1-yr fwd 31.15% over 2024 – 2025; I am handicapping NVIDIA here because the 1-yr fwd growth rate is 96.98%
PE/Revenue Growth 1.96x 1.74x

Analyst’s Disclosure: I/we have a beneficial long position in the shares of NVDA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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