Q2 Could Be the Catalyst PayPal Investors Have Been Waiting For

Key Points

• PayPal shares are up more than 30% since April after years of choppy trading. 
• Fresh product momentum and impressive buybacks are supporting a stronger narrative.
• With earnings approaching, Q2 could be the turning point for long-suffering bulls. 

Tech giant PayPal Holdings Inc. NASDAQ: PYPL has frustrated investors over the past few years. Despite being one of the pandemic’s standout winners, the stock has essentially traded flat for the better part of three years since losing 80% of its value. Every attempt at a sustained uptrend has fizzled, but the bears have also been unable to take it down lower. 

Shares have quietly climbed more than 30% since early April, and the recent price action suggests there might be something different about this rally.

With higher highs and higher lows starting to form on the chart, and a fresh earnings report due in a few weeks, PayPal is showing signs it could finally be ready to turn a corner.

Long-suffering investors will remember its massive rallies during 2020 and 2021 and can’t help but wonder: What will it take to see that kind of performance again?

A Sleeping Giant?

At its core, PayPal remains a financial services powerhouse. It owns and operates some of the world's most widely used digital payment platforms, and even after years of sluggish trading, it still processes hundreds of billions in total payment volume every year.

What’s made the recent action more interesting is the combination of solid upward momentum and encouraging developments under the hood. Management has been vocal about shifting away from lower-margin revenue lines and leaning more heavily into profitability. PayPal’s free cash flow engine is strong, and that gives them options.

Even with shares still lagging broader tech peers, management has doubled down on stock buybacks. One of the most bullish signs a company can send to the market.

And with a P/E ratio under 17, it’s hard to argue otherwise.

Products Are Landing, and the Strategy’s Evolving

One of the more encouraging signs is that PayPal’s new product lineup is actually starting to gain traction. The company has introduced a Venmo Debit Card, a PayPal Credit Card, and launched its PYUSD stablecoin. Each plays directly into the firm’s ambition to expand wallet share with consumers and merchants.

One of the stronger endorsements lately came from the RBC Capital team. Alongside its focus on diversification and margin expansion, RBC was impressed by the company’s prospects for international growth, and they see PayPal as a solid catch-up play opportunity. 

The firm reiterated its Outperform rating late last month, along with its $88 price target. That implies a targeted upside of close to 20% from current levels.

Not Everyone’s Convinced Just Yet

Of course, after years of disappointment, not everyone’s ready to be bullish. This week, the Deutsche Bank and Seaport teams took more cautious stances, preferring to wait and see ahead of Q2 earnings.

That hesitation is understandable. PayPal has let plenty of rallies fade in the past. And unless the company delivers a clean beat with solid guidance, there’s always a risk that this one loses steam too.

If PayPal Delivers, the Rally Could Take Off

That said, however, you can’t help but see the glass as half full right now. The company has been through a reset phase, trimming some fat, sharpening its strategy, and focusing on core profit drivers. It’s launching new products, improving old ones, and reinvesting through buybacks while the stock is cheap.

If PayPal delivers a strong Q2 and proves that the margin story is real and sustainable, then the market will have to take notice. The potential is there—strong cash flow, compelling valuation, and improving execution. If all of that hits at once, this could finally drive the breakout long-term investors have been waiting for.