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QS Research · Michael Burry's Scion Capital analyst template · 2006

PayPal Holdings, Inc. (PYPL)

As of 2026-11-02 · 12/15 boxes filled from SEC filings and market data

Conclusion: LONG

Conviction medium · base case +36% · downside -13% · upside +161%

At $58.62, PYPL trades at 10.3x TTM P/E and 8.0x EV/EBITDA, with a 12.9% TTM FCF yield, yet generates $6.30B of TTM free cash flow and returns almost all of it through $6.05B TTM buybacks. I value it on TTM Sep 30, 2026 figures, with no cycle averaging and only modest one-off strategic-investment hits set aside. My base case applies only a 14x multiple to the $4.73B TTM net income to common: $4.73B x 14 = $66.22B, divided by 830.66M shares gives $79.72, +36% from $58.62. A downside case of 9x on the same earnings gives $51.25, -12.6%, and an upside at the lowest peer EV/EBITDA of 19.5x on $6.80B TTM EBITDA gives $153.10, +161%. The market is missing that the discount is not supported by the balance sheet or cash generation, and the downside is contained by the already-depressed multiple.

Key numbers

The 15 boxes

  1. ✓ 1. Long-form business notes

    PayPal operates a two-sided global payments network, earning fees on payment volume and related services, with consumer and merchant solutions. FY2025 scale: $1.79 trillion TPV, 25.4 billion payment transactions, and 439 million active accounts. From FY2020 to FY2025 revenue rose from $21.45 billion to $33.17 billion and operating income from $3.29 billion to $6.07 billion. The latest report does not provide older regulatory specifics (e.g., Singapore license status) beyond a general statement on regulatory licenses.

  2. ✓ 2. Competitive advantage

    PayPal has durable competitive advantages from its global two-sided network of 439 million active accounts across about 200 markets, trusted PayPal and Venmo brands, platform-agnostic checkout, regulatory licenses, and risk/consumer protection programs. It differentiates for consumers via broad acceptance, not sharing financial information, and purchase protection, and for merchants via incremental sales, fee transparency, and seller protection. FY2025 financials show revenue of $33.17B, operating income of $6.07B, net income of $5.23B, and operating cash flow of $6.42B. Competition is intense from banks, card networks, digital wallets, BNPL, real-time payments, and crypto, so the moat is not unassailable.

  3. ✓ 3. 10-Q takeaways

    Q3 2026 net revenue rose 2% YoY to $8,584M on 6% TPV growth, but operating margin fell to 16% and net income fell 14% to $1,073M, pressured by higher transaction expense, restructuring charges, and negative other income. The April 2026 reorganization is expected to deliver at least $1.5B in gross annualized savings, and Q3 included a $152M workforce reduction charge. Cash and investments were $13.3B at Sep 30, 2026, with Q3 operating cash flow of $1.59B (-19% YoY). The 10-Q adds disclosures highlighting AI-enabled cybersecurity threats.

  4. ✓ 4. Corporate governance
  5. ✓ 5. Overview of the prior 3 years of 8-K filings
  6. ✓ 6. Other significant filings
  7. ✓ 7. Chronology of significant news and events
  8. ✓ 8. Comparables valuation interpretation
  9. ✓ 9. Insider trading interpretation
  10. ○ 10. Earnings-call notes
  11. ○ 11. Impression of the shareholder letter
  12. ○ 12. Scuttlebutt overview
  13. ✓ 13. Valuation and risk/reward summary
  14. ✓ 14. Current price suppression and potential catalysts

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