Wall Street loves simple narratives. For PayPal, the story has been brutal: "Apple Pay is winning, margins are collapsing, it’s over."
But in 2026, that narrative is dead. The data tells a completely different story.
1. The Valuation Dislocation (Math Check)
PayPal trades at 10.8x Forward P/E. The historical fintech average is 26x. Adyen trades at nearly 29x. The market is pricing PYPL as if it will never grow again.
The reality? Transaction Margin Dollars (the purest measure of profit) have flipped from decline to a sustainable 6-7% growth trajectory for 2026. This is not a stagnant business.
The market assigns zero value to Venmo. That is a mistake. Venmo revenue is growing at >20% YoY. Monetized users are generating an ARPA over $25. With 438 million active accounts in the ecosystem, we are sitting on a gold mine that is just starting to be monetized.
3. The Buyback Bazooka
Management knows the shares are cheap. That is why they plan to buy back $6 Billion in stock in 2025. That retires roughly 8-10% of the float. This creates massive artificial EPS growth even if net income stays flat.
TomAlpha Verdict:We are buying a dollar for 60 cents. The downside is protected by massive buybacks, while the margin recovery supports a path to $100+. This is a textbook asymmetric bet.
