Can PayPal Make a Turnaround With Its Buy Now, Pay Later Platform?

Core Insights - PayPal's Buy Now, Pay Later (BNPL) business is experiencing significant growth, with over 20% year-over-year growth in total payment volumes and an 18% increase in monthly active accounts in Q1 2025, driven by consumer adoption and enhanced visibility in the checkout experience [1][2] BNPL Business Performance - BNPL users on PayPal spend 33% more and conduct 17% more transactions on average, indicating the segment's critical role in increasing user engagement and revenue [2] - PayPal is enhancing BNPL visibility at checkout and integrating it into personalized strategies using AI and smart wallet features [2] Global Expansion Strategy - PayPal plans to increase BNPL adoption in key international markets such as the UK, Germany, Australia, France, Italy, and Spain in 2025, aiming to diversify its BNPL presence beyond the U.S. [3] Strategic Integration - The BNPL initiatives are integral to PayPal's transformation into a comprehensive commerce platform, aligning with innovations in checkout, omnichannel capabilities, and AI-driven personalization [4] Competitive Landscape - Affirm Holdings is expanding its BNPL business by securing long-term funding partnerships and launching a $3 billion revolving loan facility to enhance liquidity and scalability [5] - Block, Inc. is integrating BNPL features into its Cash App through Afterpay, enhancing its merchant ecosystem and expanding its reach [6] Financial Performance and Valuation - PayPal shares have declined 13.7% year-to-date, underperforming the broader industry and the S&P 500 Index [7] - The stock is trading at a forward 12-month P/E of 13.74X, significantly lower than the industry average of 22.48X, indicating a potentially undervalued position [8] Earnings Estimates - The Zacks Consensus Estimate for PayPal's earnings in 2025 is $5.08 per share, reflecting a 9.25% growth over 2024, while the estimate for 2026 is $5.64, indicating an 11% year-over-year growth [9][10]