Key Takeaways
- The bull case for PayPal projects a share price above $100, predicated on achieving mid-single-digit revenue growth and expanding net margins to 16% by 2026.
- These projections are optimistic when compared to current analyst consensus, which forecasts more modest revenue growth. The feasibility of significant margin expansion remains the central question amid intense competition.
- Critical assumptions within popular models, particularly regarding the number of shares outstanding, can materially overstate earnings per share (EPS) estimates. A more realistic share count tempers price targets.
- PayPal’s valuation is no longer demanding, but a meaningful re-rating hinges entirely on management’s ability to execute its strategy of prioritising profitable growth over user acquisition.
In the world of fintech analysis, simple back-of-the-envelope models can often crystallise a compelling investment thesis. One such calculation making the rounds for PayPal Holdings, Inc. suggests a clear path to a share price of over $100, a considerable upside from its current standing. The model is built on a foundation of steady revenue growth to over $35 billion, coupled with a significant expansion of net profit margins to 16% by 2026. While mathematically sound, this optimistic scenario warrants a rigorous examination of its underlying assumptions against the backdrop of PayPal’s competitive environment and strategic pivot under new leadership.
The core of the bull case rests on a few key metrics. An investor’s model, such as one shared by the analyst Alexis, projects a powerful combination of growth and improving profitability. However, when these figures are placed alongside consensus estimates from Wall Street, a more nuanced picture emerges.
Deconstructing the Projections
The pathway to a higher valuation is built on three pillars: revenue growth, margin expansion, and a stable valuation multiple. Let us compare the optimistic model with current market expectations. While specific 2026 forecasts are scarce, we can extrapolate from available data and trends.
| Metric | Optimistic Model (2025-2026) | Analyst Consensus Range (2025) |
|---|---|---|
| Revenue | $33.4B (2025), $35.1B (2026) | $31.5B – $32.5B1 |
| Net Margin | 15% (2025), 16% (2026) | ~12% – 14% (GAAP basis) |
| Shares Outstanding | ~875M | ~1.05B2 |
The discrepancies are noteworthy. The model’s revenue figures are at the very high end of, or above, current street expectations. More critically, the assumption of 875 million shares outstanding significantly inflates the EPS calculation. As of mid-2024, PayPal’s diluted share count is closer to 1.05 billion. Using the model’s $5.6 billion net income target for 2026 but dividing by a more realistic share count of, say, 1 billion (accounting for some buybacks), yields an EPS of $5.60, not $6.40. Applying the same 16.8x P/E multiple results in a price target of approximately $94, which, while still a healthy upside, is materially lower than $107.
The Margin Expansion Gambit
The central pillar of the bull thesis is margin expansion. PayPal’s new management has been explicit about its intention to shift focus from “growth at all costs” to “profitable growth”. This involves cost discipline and a rationalisation of its sprawling product suite. The goal is to improve operating leverage, meaning profits should grow faster than revenue.3
The ambition to reach a 16% net margin is not without precedent in the payments space, but it presents a substantial challenge for PayPal. The company faces persistent pressure on its take rates from competitors like Apple Pay, which is deeply integrated into a high-value ecosystem, and Adyen, which continues to win large enterprise clients. Expanding margins in such an environment requires a flawless execution of its new strategy, particularly in growing its higher-margin unbranded processing business and improving the monetisation of its massive but less engaged user base.
Valuation in Context
Even with a more conservative EPS estimate, PayPal’s valuation does not appear stretched. The company has transitioned from a high-flying growth stock, which commanded P/E multiples north of 50x, to what now resembles a growth-at-a-reasonable-price (GARP) investment. Its forward P/E ratio hovers in the mid-teens, a significant discount to its historical average and broadly in line with more mature payment processors.
| Company | Forward P/E Ratio (NTM) | Market Cap ($B) |
|---|---|---|
| PayPal ($PYPL) | ~15x | ~67 |
| Block ($SQ) | ~21x | ~40 |
| Adyen N.V. (ADYEN.AS) | ~35x | ~42 |
The market is clearly pricing in the execution risk and competitive headwinds. A re-rating back towards a 20x multiple, which would be needed to propel the stock significantly higher, will only occur if and when the company demonstrates sustained progress on its margin goals. For now, the stock remains a “show me” story.
A Concluding Hypothesis
The path to a $100+ valuation for PayPal is navigable, but the map provided by simple models uses some optimistic coordinates. A more probable route involves achieving slightly lower revenue growth but proving that margin expansion is both achievable and sustainable. The key variable is not a new, revolutionary product, but rather a boring, operational excellence.
Herein lies a speculative thought: What if PayPal’s ultimate victory is not in being the most innovative fintech, but in becoming the most reliable utility? By focusing on its core infrastructure, particularly the unbranded checkout services for merchants, and leveraging its immense scale for security and reliability, it could cede the front-end glamour to rivals. In this future, PayPal becomes the indispensable, high-margin plumbing of e-commerce, much like a Visa or Mastercard. This would not be a return to the heady growth days, but it would build a foundation for defensible earnings that the market would have no choice but to reward with a stable, respectable valuation multiple.
References
1. Yahoo Finance. (2024). PayPal Holdings, Inc. (PYPL) Analyst Estimates. Retrieved from https://finance.yahoo.com/quote/PYPL/analysis
2. NASDAQ. (2024). PayPal Holdings, Inc. Common Stock (PYPL) Earnings. Retrieved from https://www.nasdaq.com/market-activity/stocks/pypl/earnings
3. PayPal Holdings, Inc. (2024). Q1 2024 Earnings Call Transcript.
4. @alexis04613. (2024, Month Day). [$PYPL 2024 revenue: $31.8B…]. Retrieved from [Original URL from prompt]
