What happened

Shares of PayPal Holdings (PYPL 2.90%) slumped out of the gate Thursday, falling as much as 12.1%. As of 12:09 p.m. ET, the stock was still down 11.6%.

The catalyst that sent the fintech company's shares tumbling was its Q2 financial report. While some metrics showed improvement, others gave investors pause.

So what

For the second quarter, PayPal generated net revenue of $7.3 billion, up 7% year over year and 8% on a constant currency basis. This resulted in adjusted earnings per share (EPS) of $1.16, up 24%.  

To put this in context, analysts' consensus estimates had forecast revenue of $7.3 billion and earnings per share of $1.16, so PayPal delivered on expectations, if just barely. 

The results were fueled by total payment volume (TPV) of $377 billion, which increased 11% year over year and 11% in constant currency. Venmo's growth was moderately slower, with TPV of $67 billion rising 8%.

PayPal's net new accounts continued the sequential declines that began last quarter, decreasing by 2.5 million, or 0.6%. However, on a year-over-year basis, accounts improved by 0.4% to 2 million, bringing the total to 431 million. On the bright side, the number of transactions per active account rose 12% to 54.7.

Investors were caught off guard by the sequential decline in active accounts, suggesting that challenges remain.

Now what

PayPal's forecast was mixed, which helped fuel investor concerns. For the third quarter, the company is forecasting net revenue of $7.4 billion, up about 8% year over year, resulting in non-GAAP EPS of $1.23, which would represent an increase of about 14%. Management noted that the prior year included a $0.34 impact from the company's strategic investment portfolio. Excluding that impact, EPS is expected to jump 43%. 

The macroeconomic conditions and foreign currency headwinds have weighed on PayPal, and investors were hoping the company's growth would return. While the results were a step in the right direction, the journey is far from over.

For investors with the time and patience to wait out its recovery, the stock is currently trading at just 2 times next year's sales -- near its cheapest valuation ever -- making PayPal a buy.