PainPal
The FCF Machine That Everyone Hates
Disclosure: Not financial advice. Do your own research.
If there are companies right now catching a thematic bid, PainPal (PayPal for the unfamiliar) squarely sits on the other side of the fence. It’s what they call “down only”.
So let’s rewind for a minute.
In 2021, PYPL 0.00%↑ reached a high of $308.53. Over the course of less than 5 years, it’s down 81.67% to $56.56 as of writing this article on January 13, 2026.
And, unlike some other articles, this isn’t about painting a pretty picture. PayPal’s revenue growth slowed from 18.3% to 4.5%. In a bull market that tilts toward momentum and high beta, companies with decreasing growth rates get re-rated. And as you can see with $PYPL, get re-rated hard.
Still doubtful? Just look at Fiserv. Over the past year, FISV 0.00%↑ was re-rated, down 66.88%. On it’s Q3 2025 results alone, the stock dropped by 41%. All because growth “ground to a halt” as articles write from 10% to ~3.5%. But let’s get back to PayPal, we’ll chat about Fiserv later…
To be clear - PayPal’s story is nothing short of legendary. This company is the product of one of the toughest battles between two businesses ever fought. And from this saga, emerged the “PayPal Mafia”, a group of legendary entrepreneurs from Elon Musk to Peter Thiel to Ried Hoffman and David Sacks, the list goes on. If you don’t know the story, The Founders book is worth a read. I’d actually say it’s almost a precursor to buying shares in PayPal so you understand the real origins of the company.
But as most companies do, PayPal’s had it’s ups and downs. After IPOing in 2002, Ebay acquired the company not a year later. Eventually the PayPal Mafia left and Ebay spun the company out in 2015. Since then, PayPal has gone from $9.25 Billion in 2015 to $31.80 Billion in 2024. Distributed evenly, that’s a CAGR of 14.71%. Incredible.
When COVID hit, PayPal went vertical, exploding to the $308 share price we mentioned earlier as growth reached 20%. But since then, growth has dropped, and it’s share price with it. All the while, revenue hasn’t stopped, climbing from $25 Billion in 2021 to $31.8 Billion in 2024. In fact, PayPal’s operating margin expanded from a low of 13.9% in December 2022 to 18.2% over the LTM. The bottom line is booming, but the top-line has slowed.
In fact, it’s hard to argue that a share price of $308 was justified in the first place in 2021. We’re working with false pretenses. Exiting 2019 and going into 2020, the stock was trading at ~$105. If you put that into perspective and ignore the 2021 craziness, PYPL 0.00%↑ didn’t drop 81.67%, it’s down 41.67%. That is, of course, if you didn’t buy when the crowds were manic.
Alright so you get the gist. PayPal’s been through it, investors have been dragged along, and nobody is happy. Even management has struggled. Dan Schulmann was the CEO for a long time since the Ebay spin off in until retirement in 2023 when he handed the reigns off to the current CEO Alex Chriss.
The environment changed. Stocks like PLTR 0.00%↑ outperformed, putting up over 650% rise in share price, at scale since Palantir’s market cap is now a whopping $426 Billion. That’s over the same period that PYPL 0.00%↑ dropped by 81.67%. And for good reason. Palantir has growth. Insane growth. PayPal… doesn’t. And in fact, it’s not even just growth. The market has consistently cruised to all time highs.
The issue, especially for the investor, is what happens when companies like PayPal get re-rated in a growth environment. Sentiment deteriorates. Quickly. Just look at these examples from X.
And my favorite:
Everyone hates PayPal. And 99% of the ones who don’t, are yapping. If they weren’t, the stock would catch a bid!
There are still some people willing to go dumpster diving for companies like PayPal. Some of them we can find on dataroma.
Perhaps the most comforting to see is Norbert Lou. Someone who holds extreme conviction in very few ideas. He doesn’t put all his eggs in one basket, but he pays attention to the fews baskets he owns very carefully. PYPL 0.00%↑ is one of those. Punch Card Management has a very small number of positions with high concentrations.
Anyways, back to fundamentals. We’re not here to copy trade superinvestor filings that have no guarantee of being accurate post-filing.
Let’s be clear, PayPal dominates the payment processing market, holding a 45.52% market share. And look at the landscape. Even Stripe - yes the one worth $106 Billion - only commands 17.15%. Stripe is the golden child. It’s certain that they’ll win payments, or so we’re told. And they’re given a $106 Billion valuation as such. Maybe PayPal has something defensible?
When looking at PayPal’s business, there’s a lot to dig into, and it’s probably topic for another article. From the recent bank charter, to venmo, to agentic integrations, PayPal has been doing everything it possibly can to position itself for the future. Alex Chriss, unlike what some say, is working extremely hard along with his team. Maybe they won’t win, but you can’t say they have been sitting on their hands. And that’s what the intelligent investor needs to see. At times, it’s not just about a margin of safety and a management that can do nothing like Coca Cola. It’s the hairy situations. When things need to change to re-accelerate growth. When there’s a margin, but you can’t tell how much it will change and how management affects that margin of safety. The intangibles.
There are very few companies so bad they can’t be underpriced. (From Howard Marks)
There are plenty of deep dives into PayPal available on substack like this one and many writeups on Value Investors Club such as Flaum’s post. Go read them.
We’re not diving into every nook and cranny of PayPal’s business.
This is about contextualizing the stock. Why is Mr. Market so down on PayPal? Is it even down? Maybe it deserves this price? Look at the data and come up with your own opinion - your edge.
It’s fun to tune into Amits Deep Dives youtube channel to get some input about what’s going on. As an aside, he does a really great job, go subscribe. His heart is in it.
On “Technical Tuesday”, one of the stocks reviewed was PayPal. The screengrab of this part is pasted below because it’s history. The technicals according to Jason don’t show anything pretty. $PYPL’s tested support too many times and if it breaks lower, it can head to the low $40s.
Druckenmiller has always said even if he likes the fundamentals, if the charts don’t support the trade, he won’t do it. And he also makes a big deal about skating to where the puck is going. AMZN 0.00%↑ is for Stan, PYPL 0.00%↑ probably isn’t.
We said we’d return to FISV 0.00%↑. Well now’s that time. On one hand, you’ve got PayPal. A company with gradually slowing revenue growth, but effectively no debt, and 11% free cash flow yields at the current price, buying back almost 2% of outstanding shares not every year, every quarter. Oh, and it also spews off a 1% annual dividend yield.
On the other, you’ve got Fiserv. The peanut gallery that is Fiserv management decided it would be a great idea over the past few years to buyback equity with debt. Well, now that growth has slowed, that’s come to bite them in the butt. What originally looked like an insignificant debt load, has now tripled in relative size to it’s market cap. Beware of “compounders” that can never be too expensive!
So two very different situations, but both getting a massive re-rating.
And don’t confuse the Fiserv comments for a pessimistic view on the stock, Fiserv has been discussed clearly.
Who knows. Maybe PayPal with it’s 11% buyback yield won’t make up for it’s technological leadenness. One thing’s for sure is PayPal is not favorable right now. Even a lot of long-time bagholders are bailing. Nobody wants to buy. PayPal isn’t cool, you know what is cool? Drones. Edge Compute. Obscure precious metals.
Till next time, or whenever this substack is renamed “most hated equities” or something.
The pain is real