PayPal (PYPL 2.00%) reported fourth-quarter earnings that missed expectations, but that wasn't the big story. Along with its earnings release, PayPal announced that it is immediately parting ways with CEO Alex Chriss, who has been with the company only since late 2023 and was tasked with turning the business around after its post-COVID slowdown.
With the stock trading at a single-digit P/E and several key growth initiatives underway, is it a good idea for investors to double down on the payments leader?
Image source: Getty Images.
There's a lot to like about PayPal right now
Of course, the 4% year-over-year revenue growth that PayPal just reported isn't likely to get most investors too excited. But there is a lot going on that isn't yet reflected in the numbers, and this is one of the big reasons I've been so bullish on the stock in the first place. Consider this list of growth initiatives:
- PayPal announced that it will be the first integrated payments wallet in OpenAI's ChatGPT, which is launching in 2026.
- The company has partnered with Google to develop new payments solutions to integrate across Google's platforms, which are used by billions.
- PayPal rolled out a best-in-breed rewards program for buy now, pay later (BNPL) transactions.
- PayPal launched its Agentic Commerce Services for merchants.
- The company applied for an industrial banking charter.
- PayPal announced an agentic commerce partnership with Microsoft (MSFT 0.36%) to launch Copilot Checkout.
This list is even more impressive when you consider that this is just what has been announced since September. So, there's a lot happening in the business right now.
NASDAQ: PYPL
Key Data Points
Incoming CEO Enrique Lores is a solid leader. He not only led a difficult transitional period at HP (HPQ +2.52%) but had been with that company since 1989, when he started as an intern. He's focused on returning PayPal's branded checkout to growth, which could help accelerate near-term results, alongside the more long-term initiatives in the above list.
Finally, PayPal's valuation is now absurdly cheap. The stock trades for less than seven times expected 2026 free cash flow, and the company continues to buy back stock hand over fist. In fact, based on expectations of $6 billion in buybacks this year, PayPal could end up buying back about 15% of its outstanding shares if this depressed valuation holds.
Recent results leave a lot to be desired
As mentioned, PayPal's recent results have been disappointing. In the fourth quarter, PayPal's revenue grew by just 4% and adjusted EPS grew by just 3%. And due to lower interest rates (PayPal gets substantial revenue from interest on its cash, plus customer balances) and the need to invest more in the business, PayPal gave disappointing guidance that calls for earnings per share to decline in 2026.
In short, the growth initiatives executed by Chriss and his team so far haven't produced as much improvement in the numbers as the company's board of directors had hoped for, and that's why they decided to make a change in the C-suite.
A good time to be cautious
In full disclosure, I'm a PayPal shareholder and have called the stock one of my top buys for 2026. And if this decline holds, I'm likely to add to my position, as it isn't a particularly large part of my portfolio right now.
Having said that, the CEO shake-up adds significant near-term uncertainty, and it would be completely understandable for investors to take a more cautious approach. There's no denying that PayPal has been a disappointment over the past several years, and while there are some reasons to be optimistic, a turnaround is far from certain at this point.
