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.
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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.
