PayPal: Potential Rebound with Call Options and Valuation Reset
"The first one very hated stock is PayPal. PayPal is down 65% over the last 5 years. The sentiment is so bad on PayPal that its now trading at 12 times earnings, compared to trading at 60 times a few years ago. Yet, if you look at the active accounts, they have been growing every single quarter, by about 2 million each time, and total payment volume has been increasing almost every quarter. The decline in revenue growth from 9% down to 1% was temporary due to unprofitable contracts with Brainree, which the CEO cancelled to focus on profitable growth. Now, trading at a 12% free cash flow yield (roughly 10% after stock-based compensation), its a high margin business that can buy back 10% of its shares annually. I believe the potential for a massive change in sentiment in 2026 is huge."
The speaker outlines a contrarian opportunity in PayPal, emphasizing its drastic valuation compression from 60x to 12x earnings. Despite negative sentiment, key metrics such as growing active accounts and consistent payment volume indicate underlying strength. The temporary revenue slowdown due to Brainree contracts has ended and the strong free cash flow yield supports robust share buybacks, positioning PayPal for a sentiment reversal in 2026.
Buy Rating for PayPal Based on Undervaluation and Earnings Growth
"Let me share with you my proprietary discounted cash flow valuation for PayPal. I updated this this morning and I value PayPal at an intrinsic value of $135. The current market price is only 70. So this stock looks very undervalued at the current market prices. The risks are like I mentioned that its losing market share as other companies are innovating more quickly. It risks being left behind. However, I do see the reward being worth the risk here. And so to answer the question, do I think PayPal stock is a buy before earnings? I think so. I think the answer is yes. And so I will reiterate my buy rating for PayPal stock today, October 23rd, 2025."
The speaker reiterates a buy rating for PayPal, emphasizing its undervaluation with an intrinsic value of $135 compared to a market price of 70, strong earnings per share growth, and a low forward price-to-earnings ratio. Despite risks from diminishing engagement and competitive pressures, the valuation and growth catalysts make the stock an attractive opportunity.
PayPal Entry Reassessment at $90
"It wasnt really making new lows. So you could say, okay, its still, the space is still forming, but I need more evidence. It probably will be a better buy to buy at $90 after weve get some confirmation of good news."
The manager observes that while PayPal (PYPL) has stabilized after forming a base, the current price action indicates that waiting for further confirmation may offer a more attractive entry point around $90, improving the asymmetry and lowering downside risk.
Conditional Buy Call for PayPal (PYPL)
"I have a list of great companies that I plan on buying before October ends, but only if they hit the value that I need them to hit. When the price makes sense, I purchase because a great company at the wrong price can become a terrible investment."
The speaker explains why PayPal is an attractive investment due to its shift from a basic payment button to a digital payments ecosystem with recurring revenue from Venmo, buy-now-pay-later, crypto, and even ad-platform initiatives. Despite its current depressed price, the fundamental metrics such as free cash flow and return on capital remain strong. The trade call is conditional on the stock reaching the right value, with support around $50 and a potential run if volume increases.
Trade Call: Use $65 Put Option Strategy on PayPal (PYPL)
"The first one is going to be PayPal Holdings, stock ticker PYPL. And the stock is incredibly cheap... looking here at the charts, we could see the stock has been consolidating between the $70 and mid $60 range and it's ready to break higher. Lets take a look from an options perspective now at the November 21st $65 put, which would give us the potential obligation to buy the stock at a lower price. And for that, we would be earning $230 per contract for selling that option."
A trade call recommending exposure to PayPal through an options strategy. The speaker highlights that PYPL is undervalued relative to its 5-year average PE, driven by revenue growth from Venmo and efficient operating margins. The suggested play is to sell November 21st $65 put options to potentially accumulate shares at a lower cost while earning option premium income.
PayPal Rises on Partnership with Google
"PayPal jump popped about 3% on that partnership with Google."
PayPal is experiencing a modest rally driven by its new strategic partnership with Google, contributing to renewed investor optimism in the near-term.