PayPal Holdings, Inc. (PYPL): A Bull Case Theory

Core Thesis - PayPal Holdings, Inc. is viewed as a compelling investment opportunity due to its strategic pivot under CEO Alex Chriss and significant market mispricing relative to intrinsic value, currently trading at a 29% discount to its DCF-based fair value [2] Growth Initiatives - Key growth initiatives include Fastlane by PayPal for one-click guest checkout, unbranded processing via Braintree for high-volume clients, monetization of Venmo through various integrations, and expansion into small and medium businesses with PayPal Open [3] - The DCF model assumes conservative explicit growth of 6–4% over ten years, with PayPal having never experienced revenue decline in the past decade [3] Financial Projections - Long-term growth is projected at 2.6%, with a WACC of 9.4%, a 10x EBITDA exit multiple, a 21% tax rate, and reinvestment based on a 1.1 Sales-to-Capital ratio [4] - The bull case emphasizes strong free cash flow, self-correcting valuation, underappreciated margin recovery, and improved user experience from platform simplification [4] Market Positioning - Despite slower growth, the market has over-discounted risk, creating a favorable entry point for investors [5] - PayPal's combination of discounted valuation, strategic initiatives, and resilient financial profile supports maintaining a modest position of 2–3% of a diversified portfolio [5] Historical Context - The stock price has depreciated by approximately 18.45% since previous coverage due to market concerns over slower margin expansion, but the current analysis emphasizes DCF-based upside and the importance of buybacks and margin normalization [6]