Is This Payments Stock Undervalued After Its Recent Decline?

Key Points

• PayPal missed analyst expectations on the top and bottom lines in the fourth quarter.
• It recently made several exciting announcements, including a CEO change and partnerships with OpenAI and Microsoft.
• PayPal stock is trading at a dirt cheap price.
• 10 stocks we like better than PayPal ›

Things have gotten ugly for PayPal (NASDAQ: PYPL). The payments giant has been struggling to grow, and its stock is 83% off its all-time high.

However, it still has a huge business and many opportunities. Let's see what went wrong, what's going right, and if the stock is undervalued at the current price.

PayPal is ceding territory in digital payments

PayPal has 439 million active accounts and 231 million monthly active accounts as of the end of the 2025 fourth quarter. That gives it a first-mover's edge against competitors, but it also makes it harder to generate growth. Active accounts and monthly active accounts grew only 1% in 2025.

Image source: The Motley Fool.

For a while, the company had shifted its focus to monetizing its existing customer base rather than winning new customers, but transaction growth per active customer has been on the decline over the past four quarters.

There are a plethora of new payment options that are gaining traction and capturing market share, and PayPal's historic lead is eroding, even though it's still the company to beat in digital payments. Companies like Alphabet and Apple, which have easy access to their users, offer competitive options. It has become a challenge for PayPal to maintain its lead, although it has been doing pretty much everything under the sun to boost growth.

PayPal's 2025 financial results were mostly positive. Total payment volume was up 7%, and revenue increased 4%. Adjusted earnings per share (EPS) rose 14%. However, it missed Wall Street expectations on the top and bottom line for the fourth quarter.

PayPal is also still working on boosting its branded business, which has higher margins than its unbranded business. Management has been measuring its profitability with a metric it calls transaction margin dollars. This demonstrates how profitable transactions are overall and that revenue growth is efficient. This metric increased 6% in 2025.

Uncertainty and opportunity

Even worse than the fourth-quarter miss was a disappointing outlook that called for slight declines in transaction margin dollars and EPS. Along with the results came the stunning announcement that relatively new CEO Alex Chriss is leaving, and HP CEO Enrique Lores is coming on board in the top spot. While that's exciting news, it wasn't enough to keep PayPal stock from plunging.

At the current price, PayPal stock trades at the dirt cheap P/E ratio of less than 9. That's only undervalued if you expect the stock to rise. There are plenty of reasons to be excited about what's happening at PayPal, which has introduced a slew of important updates, including partnerships with Google, Microsoft, and OpenAI. Its Store Sync capabilities make purchases available through artificial intelligence (AI) platforms using PayPal, which could be the shopping of the future.

PayPal stock does look undervalued at the current price, considering its brand power, innovation, and dominant position in digital payments. However, given the current uncertainty, it may take time for the company to stage a comeback and reward shareholders.