PayPal: Anatomy of a Value Trap
Related content
Delivery Hero Is Back on Track
European stock markets have failed to reach new highs; in fact, they are significantly underperforming their U.S. counterparts, so there are few truly high-quality reversal signals visible in the market at the moment. Last week, however, one of the stocks from our Equity Top Pick List, Novo Nordisk, signaled the start of an uptrend, which continues to hold. The stock continues to hold a prominent position among the assets worth watching, so it remains advisable to keep it in focus. In addition, we took a closer look at Delivery Hero shares this week, as a favorable long-term situation is beginning to emerge there as well.
Hungarian Equities - Technical Analysis
The index continues to be in a correction phase, which could later lay the groundwork for a long-term upward move, provided the key levels listed below remain intact. MOL: Moving through a correction phase, showing a neutral picture for now; we are awaiting a concrete signal. Richter: It remains a realistic scenario that a rounding bottom pattern has formed with a neckline at 12,500. This could provide an opportunity for a pullback to the 11,875 level. Magyar Telekom: Despite the dividend payment, the stock was already in a correction phase. Opus: A break in the downtrend is imminent; this would “only” require a break above the downtrend line. 4iG: It remains in a downtrend, but the 1,875 level is a key support. No buy signal has been received yet, but if the price stabilizes above this level, the path could open up ahead of a reversal.
Our latest read on PayPal’s report confirms that what many long regarded as an undervalued opportunity is, in fact, a classic value trap. Weaker-than-expected quarterly results and guidance, the dismissal of the CEO, and mounting structural industry pressures have collectively shattered investor confidence. As a result, we are removing the stock from our Preferred Stocks List.
PayPal’s share price plunged after the company posted weaker-than-expected numbers in its quarterly release and at the same time dismissed the CEO appointed two and a half years ago, whom the shareholders had expected to deliver a turnaround. We, too, waited too long for that turnaround; in hindsight, we should have removed the name from our Preferred Stocks List in 2025—something we are doing now.
Back in late 2023 we were optimistic on PayPal: it’s a strong brand whose share price had fallen sharply from its pandemic-era highs. There appeared to be real potential for a turnaround, especially with the appointment of the new CEO, Alex Chriss. Over the ensuing two-plus years there were several rallies when it looked as if a growth inflection might be taking hold, and most earnings prints were not outright bad. Even so, the reorganization ultimately ran into roadblocks.
The prior November earnings release should have been a warning sign. The stock initially surged, then reversed and has been sliding back ever since. Based on the latest report, this increasingly looks like a value trap—a stock that screens cheap on financial metrics but is not a good investment because the apparent “cheapness” masks persistent, structural deterioration, preventing a meaningful rerating.
PayPal displays the defining features of a value trap: profitability has been deteriorating for a prolonged period, a problem the (now-ousted) CEO was unable to fix—hence the leadership change. The company, like the broader online payments industry, faces structural challenges: competition is intense, the large tech platforms (Apple Pay, Google Pay) dominate, and numerous fintech entrants crowd the space, eroding margins and constraining growth. Crucially, PayPal has failed to deliver meaningful growth in its higher-margin branded checkout segment. For this year, management guides to at best minimal profit growth, whereas analysts were expecting around an 8% increase.
We’re not saying PayPal is entirely hopeless as an investment. However, we won’t wait to see whether a new CEO can engineer an operational turnaround that would finally spark a sustained share-price recovery. Accordingly, we are removing PayPal from our Preferred Stocks List.
Get more out of your investments!
Global Markets Services
OTP Global Markets offers a broad range of services in the field of local and international money and capital markets.
Read morePrivate Banking Services
Personal care and expertise with OTP Private Banking, along with the knowledge, security, and innovations of a multinational banking group.
Read more