A Legal Victory and Strategic Moves Boost PayPal’s Prospects

Investors in the digital payments leader have endured a volatile period, with the stock testing crucial support levels for several weeks. However, a significant development beyond quarterly earnings has emerged: a US judge has definitively dismissed a burdensome class-action lawsuit. Could this legal triumph, combined with fresh strategic initiatives, signal the long-awaited reversal in fortune?

The recent legal success is complemented by a series of strategic actions spearheaded by CEO Alex Chriss, aimed at restoring investor confidence.

• Expanded KKR Agreement: The partnership with the financial investor KKR has been significantly broadened. KKR is set to acquire up to €65 billion in receivables from PayPal's European "Buy Now, Pay Later" (BNPL) portfolio. This "asset-light" approach is a shrewd move to clean up the balance sheet while PayPal retains the direct customer relationship.
• Liverpool FC Collaboration: A multi-year partnership with the renowned English football club has been established to enhance user engagement, featuring new reward programs for its global fan base.

These decisive steps demonstrate that management is proactively seeking new growth avenues in the face of intensifying competition from Apple Pay and other digital wallets, rather than remaining passive.

A Decisive Legal Win

A palpable sense of relief has spread through the market. A federal judge in San Jose has thrown out a class-action lawsuit that had been looming over the company. The dispute centered on the popular browser extension Honey, which PayPal acquired in 2020 for $4 billion. Influencers and content creators had alleged that the extension was used to unlawfully divert affiliate commissions.

Should investors sell immediately? Or is it worth buying PayPal?

The court's ruling was unambiguous: the plaintiffs failed to provide evidence of concrete damages. The judge noted that the affiliate marketing commission models operate on a "last-click" principle—terms to which the plaintiffs had previously agreed. For PayPal, this represents a critical victory. It not only validates the business practices surrounding Honey but also eliminates the risk of costly settlements and potential damage to its reputation.

Solid Fundamentals, Weak Share Performance

Despite these operational advances and robust quarterly results, which included a revenue increase of approximately 7%, sustained optimism has yet to be reflected in the share price. The stock is currently trading at €53.03 as it struggles to establish a firm footing.

The equity remains under pressure, down nearly 37% since the start of the year. Market participants continue to express skepticism about the company's ability to maintain profitable growth within the fiercely competitive payments landscape.

Investment Outlook

The dismissal of the Honey lawsuit removes a significant overhang. Investor attention can now focus entirely on the execution of new AI-driven shopping initiatives, dubbed "Agentic Commerce." From a valuation perspective, the stock appears attractive, trading at a P/E ratio of roughly 11.5 and supported by an ongoing share buyback program. However, from a technical analysis standpoint, the price chart must now demonstrate convincing signs that the prolonged downtrend has conclusively ended.