PayPal shares fell 81% from peak.PayPal profit per share rose 54%.
The verdict
17/ 20High conviction
The profits grew. The share price fell 81% from its peak. On 27 October PayPal beat the profit forecast for Q3 and raised its 2026 target to about $5.60 a share, but sales grew only 2%. A cash machine at 10 times profit, with a growth problem.
1. Durable moat (Green)
4 of 5 (3.75): 439M accounts and a famous brand, but rivals are closing in on checkout
4 of 5 (3.75): 439M accounts and a famous brand, but rivals are closing in on checkout
2. Return on capital (Green)
23 cents per $1 (ROIC 23%), up from 15% in 2020
23 cents per $1 (ROIC 23%), up from 15% in 2020
3. Growth runway (Green)
Sales up 9.1% a year since 2020, but only 4.3% in 2025
Sales up 9.1% a year since 2020, but only 4.3% in 2025
4. Cash conversion (Green)
106 cents of cash for every $1 of profit in 2025
106 cents of cash for every $1 of profit in 2025
5. Balance sheet (Green)
No net debt: $15.1B cash and investments vs $13.5B debt (30 Sep 2026)
No net debt: $15.1B cash and investments vs $13.5B debt (30 Sep 2026)
6. AI resilience (Amber)
3 of 5: AI helps with fraud and reach, but AI shoppers may skip the PayPal button
3 of 5: AI helps with fraud and reach, but AI shoppers may skip the PayPal button
7. Insider alignment (Amber)
$8.3M sold, $0 bought in 12 months (5 executives, no open-market buys)
$8.3M sold, $0 bought in 12 months (5 executives, no open-market buys)
8. Margin of safety (Green)
About 43% below our $100 estimate (20% below $71 without the DCF)
About 43% below our $100 estimate (20% below $71 without the DCF)
9. Yield vs safe bonds (Green)
11.5% cash yield (9.4% after stock pay) vs 4.96% from US Treasuries
11.5% cash yield (9.4% after stock pay) vs 4.96% from US Treasuries
10. Crowd sentiment (Amber)
Early warning stage, unconfirmed: 8% below the Aug peak; 33 of 44 analysts say Hold
Early warning stage, unconfirmed: 8% below the Aug peak; 33 of 44 analysts say Hold
InvestingGym scorecard. Data: SEC EDGAR (10-K FY2018-FY2025, Q3 2026 8-K of 27 Oct 2026, Form 4), price $56.55 (28 Oct 2026 close), Alpha Vantage / FRED (10-year US Treasury 4.96%, 22 Oct 2026). Includes Q3 2026 results.
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