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    Is PayPal Holdings (PYPL) Undervalued After Its AI Cost Cuts And BNPL Push?

    Simply Wall St·07/08/2026 23:33:08
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    Index reshuffle puts PayPal Holdings (PYPL) under a fresh spotlight

    Recent index changes saw PayPal Holdings (PYPL) dropped from the Russell Top 200 Index and Russell Top 200 Value Benchmark, while gaining inclusion in the Russell Midcap Index and Russell Midcap Value Benchmark.

    This shift reflects a reclassification of PayPal within the US equity universe rather than a change to its core business. However, it can influence which funds hold the stock and how trading volumes evolve.

    See our latest analysis for PayPal Holdings.

    At a share price of US$44.53, PayPal’s 1 month share price return of about 7.9% contrasts with a year to date share price decline of around 23%, while 1 year total shareholder return is down about 40%. Recent momentum has therefore improved from a low base as investors weigh cost saving plans, AI driven efficiencies and buy now, pay later expansion alongside ongoing competitive and execution risks.

    If you are weighing PayPal’s repositioning, it can help to see how other companies are priced and growing too, so take a look at the 19 top founder-led companies

    PayPal looks like a large-scale, cash-generating payments platform that is cutting costs and pushing BNPL and AI. Yet its move into mid-cap territory and long slide in returns raise a simpler issue: is the stock actually cheap?

    Most Popular Narrative: 31.5% Undervalued

    According to the most followed narrative on PayPal Holdings, a fair value of $65 sits well above the last close at $44.53. This frames the current debate around whether the stock is being treated as a structurally impaired business.

    The market prices PayPal (approximately 8x earnings) as a structurally dying payments company. The numbers show something else: approximately $6.8B in annual free cash flow, a net-cash balance sheet (about $13.5B cash versus roughly $11.6B debt), around 440M active accounts, and total payment volume of roughly $464B per quarter, still growing about 11%. My core thesis is that PayPal does not need to grow to re-rate, and that mere stabilization is enough. If the multiple normalizes from about 8x to just 12x (still well below the market), the stock rises approximately 50% on flat earnings.

    Read the complete narrative.

    This narrative, set out by benjamin_lvieq, leans heavily on PayPal’s cash generation, buyback pace and a re-rating built on stabilization rather than rapid expansion. Want to see which earnings, margin and share count assumptions sit under that $65 fair value and how they tie back to PayPal’s payments engine over the next few years? The full narrative lays out those moving parts in detail.

    Result: Fair Value of $65 (UNDERVALUED)

    Have a read of the narrative in full and understand what's behind the forecasts.

    However, PayPal also faces pressures on operating margins and early signs of user and engagement erosion, which could weaken the buyback case if those trends worsen.

    Find out about the key risks to this PayPal Holdings narrative.

    Next Steps

    With both risks and rewards in play for PayPal Holdings, do you want to rely on others or press ahead and test the data yourself? To see the balance of potential upside and downside in one place, start with the 3 key rewards and 1 important warning sign

    Looking for more investment ideas beyond PayPal?

    If you are reassessing PayPal alongside the rest of your portfolio, do not stop with a single stock. Fresh ideas from different angles can sharpen your decision making and reveal opportunities you might otherwise overlook.

    Use the Simply Wall Street Screener to quickly surface stocks that match the kind of profile you want to research next, instead of scrolling through tickers one by one.

    This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.