David Einhorn Just Bet $61.5 Million on PayPal. Why PYPL Looks Cheap Again.

David Einhorn just placed a big bet on PayPal (PYPL). The legendary hedge fund manager added a new stake in PYPL stock during the second quarter, which quickly caught investors' attention.

Einhorn is no ordinary investor. He's known for spotting value where others see only problems. His firm, DME Capital Management, bought 1.42 million shares of PayPal during Q2 worth $61.5 million as of June 30. That's a serious vote of confidence.

So, why does Einhorn like PayPal right now? The stock has been through the wringer, down more than 70% from its 2021 peak. But the company is executing a turnaround. Earnings are beating estimates, free cash flow is surging, and there's even a potential buyout brewing.

Einhorn seems to think the market is missing something. Let's dig into what that might be.

PYPL Stock Has Recovered, But Remains Far Below Its Peak

PayPal shares have had a difficult longer-term run. The stock remains roughly 79% below its 2021 peak, although the picture has improved more recently.

Shares are up about 5% year-to-date (YTD) in 2026, while the three-month gain is close to 39%. Over the past 12 months, however, PayPal remains down by roughly 9%.

The recent rebound followed the Q2 earnings report and improving expectations around the company's turnaround. At the same time, competition from companies such as Stripe and Block (XYZ), along with concerns over growth and investment spending, have continued to weigh on sentiment.

The Valuation Makes Einhorn’s Move Interesting

PayPal stock trades at roughly 11.7 times earnings, which is below the financial services sector median of about 14 times. Its current multiple is also far below its five-year average price-to-earnings (P/E) ratio of approximately 30 times, while the P/E-to-growth ratio is around 1.5 times.

That does not necessarily mean PayPal is a bargain.

For Einhorn, the opportunity may not require PayPal to return to its previous valuation. Even a moderate re-rating could provide meaningful upside if earnings and cash flow continue improving.

PayPal's Latest Quarter Gives Einhorn a Reason to Look Closer

PayPal reported Q2 revenue of $8.68 billion, up 5% year-over-year (YOY) and above analysts' $8.51 billion estimate. Adjusted EPS came in at $1.38, topping the $1.28 consensus estimate by roughly 8%. While adjusted EPS declined 1% from the prior year, the earnings beat showed that the company continues to generate substantial profits despite a more competitive payments environment.

Free cash flow was another highlight. Adjusted FCF jumped 179% YOY to $1.83 billion, while operating cash flow increased 121% YOY to $1.98 billion.

Management also raised its full-year outlook and expects 2026 non-GAAP EPS of $5.38, alongside at least $6 billion in adjusted free cash flow.

That combination of earnings, cash generation, and a higher outlook helps explain why a value-focused investor such as Einhorn may see an opportunity.

PayPal Is Looking for Growth Beyond Core Checkout Business

The company is also trying to build additional growth engines.

Venmo remains an important part of that strategy. Venmo's total payment volume increased 14% during Q2, while branded checkout volume rose 2% on a currency-neutral basis.

PayPal is also investing in areas including Buy Now, Pay Later (BNPL) and its consumer wallet, while continuing to focus on cost efficiency and capital returns.

There is also potential M&A speculation surrounding the company. Reports have indicated interest from potential buyers, although any transaction remains uncertain and should not be treated as part of the core investment thesis.

Wall Street Remains Divided on PayPal Stock

Analysts are not yet convinced that PayPal deserves a major re-rating. The consensus is a “Hold” rating overall based on 46 analysts with coverage. That breaks down to four “Strong Buy” ratings, two “Moderate Buy” ratings, 36 “Hold” ratings, one “Moderate Sell,” and three “Strong Sell” ratings. The average price target of $56.76 implies potential downside of 8% from current levels.

Recent targets show the split. Truist recently raised its target to $62 from $59 while keeping a “Hold” rating, while Piper Sandler lifted its target to $59 from $42 but maintained a "Neutral" rating. Cantor Fitzgerald also raised its target to $60 from $54. On the more cautious side, Goldman Sachs has a $50 target and a “Sell” rating, while Morgan Stanley's target stands at $45.

For now, Einhorn's $61.5 million position stands out because it suggests he sees value where much of Wall Street remains undecided.