Should You Buy, Sell or Hold PayPal Stock After a 36.1% 3-Month Rise?

PayPal Holdings PYPL stock has gained 36.1% in the past three months, driven by Total Payment Volume (TPV) and Venmo growth, and a clearer strategic roadmap. The stock also received a boost from speculation surrounding a potential acquisition offer from Stripe and Advent International, which ultimately did not result in a transaction.

Although competition in the digital payments space remains intense, PayPal has significantly outperformed key rivals Visa Inc. V and Mastercard Incorporated MA over the same three-month period. V shares have gained 8.3% and MA has risen 11.3%, well below PayPal’s 36.1% surge.

With PayPal substantially outperforming its major peers, the key question now is whether investors should trust this sharp rise and view it as the beginning of a sustainable recovery.

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Let’s take a look at PYPL’s fundamentals to analyze the stock better.

Key Highlights of PYPL’s Q2 Earnings Release

On paper, PayPal reported decent growth in the second quarter of 2026. The company’s net revenues came in at $8.68 billion, rising 5% year over year. TPV climbed 10% to $486.45 billion. Transaction margin dollars (TM$) increased 1% to $3.90 billion from the year-ago quarter. Total active accounts increased slightly year over year to 439 million.

However, non-GAAP operating income decreased 8% to $1.51 billion, and operating margin fell 248 basis points to 17.4% year over year. Non-transaction related expenses rose 9% to $2.39 billion, underscoring increased spending tied to technology and growth initiatives.

For 2026, PayPal expects non-GAAP earnings per share (EPS) of about $5.38, up from $5.31 in 2025. The company expects the TM$ outlook to be approximately $15.6 billion and anticipates TM$, excluding interest on customer balances, of about $14.5 billion.

PYPL’s Venmo Drives Growth

Venmo is positioned as the preferred money movement platform for the young, affluent, digitally native consumers. As consumers increasingly use Venmo for everyday purchases, it contributes a larger share of PayPal’s revenues. In the second quarter of 2026, Venmo’s TPV rose 14%, marking its seventh consecutive quarter of double-digit growth.

Monetization improves as customers adopt more Venmo products. Venmo Debit Card monthly active accounts (MAA) grew more than 50% year over year, while Pay with Venmo MAA rose about 30%.

Customers using both Venmo Debit and Pay with Venmo generated more than nine times the Average Revenue per Account of peer-to-peer-only users. This customer group has roughly doubled in size over the past year, giving management a path to lift revenues without depending on account growth.

PayPal’s Next-Gen Transformations

PayPal is expanding its AI-powered commerce initiatives through agentic commerce, enabling autonomous AI assistants to help consumers identify, evaluate and purchase products more efficiently. To strengthen this effort, the company has partnered with Microsoft through Copilot Checkout, OpenAI via ChatGPT and Perplexity through its Perplexity Pro platform, creating smarter, more secure and scalable shopping experiences for both merchants and customers.

PayPal is also transforming its technology infrastructure by moving toward a single, more unified platform. The company is migrating more of its systems to the cloud and simplifying its architecture to reduce complexity, improve reliability and speed up product development. This modernization is intended to make PayPal faster and more efficient while creating a stronger foundation for future digital payment services.

Concerns to Note for PayPal

PayPal remains exposed to shifts in consumer and merchant spending, particularly in online checkout categories. In the second quarter of 2026, online branded checkout TPV grew 2% on a currency-neutral basis, consistent with the last quarter, indicating that growth has stabilized at current levels. Management now expects low-single-digit branded checkout growth for full-year 2026. While this stabilization is encouraging, any renewed slowdown could weaken PayPal’s growth trajectory.

PayPal’s international footprint makes reported results sensitive to currency movements. Customers domiciled outside the United States generated 42% of net revenues in the second quarter of 2026. A reversal in currency trends could therefore reduce reported growth and earnings even if underlying payment activity remains stable, although PayPal uses hedging programs to reduce some of this exposure.

PayPal operates in a highly competitive payments market where digital wallets, card networks and commerce platforms compete on pricing, product features, user experience and distribution. Sustained competitive pressure could limit PayPal’s branded checkout growth, reduce merchant or consumer engagement, require higher product investment, or pressure transaction economics if the company is unable to keep pace with competing payment experiences.

PYPL Shares Trade at a Discount

PayPal shares are trading cheap, as suggested by the Value Score of A. In terms of forward 12-month Price/Earnings (P/E), PYPL stock is trading at 10.93X compared with the Zacks Financial Transaction Services industry’s 18.85X.

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PYPL’s Earnings Estimate Revision Trends Upward

PayPal’s estimate revisions reflect a favorable trend for full-year 2026. The Zacks Consensus Estimate for 2026 EPS has moved 5 cents upward to $5.37 over the past month. This implies a 1.1% rise over 2025.

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How to Play the PYPL Stock?

PayPal's decent second-quarter results, Venmo’s growth and next-gen transformations provide for optimism in its recovery path. Despite rising competition, currency movements and low checkout growth expectations, the stock is outperforming peers and trading at a significant discount compared to its industry multiples. This makes the stock worth retaining in the portfolio.

At present, PayPal carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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