Michael Burry Says PYPL Is Cheap Next To FISV, Has 16%-17% Compounding Potential — And PE Could Come Knocking

• Burry also pointed to PayPal’s AI-led restructuring and cost-saving initiatives.
• Burry said the company was a long-term growth investment despite the stock’s more than 31% decline over the past 12 months. 
• The contrarian investor also highlighted PayPal’s discounted valuation relative to fintech company Fiserv.

Michael Burry, the investor made famous by his contrarian “Big Short” bet during the subprime mortgage crisis, reiterated his confidence in PayPal Holdings (PYPL), saying it could become a private equity or strategic acquisition target amid the aggressive turnaround plans under new CEO Enrique Lores.

“The PayPal position is now a full position at 6.6% of the portfolio,” Burry said in a post on Substack, adding that PayPal “may find itself in play as either a PE target or a strategic acquisition.”

The comments come after PayPal guided for a high-single-digit decline in adjusted earnings for the current quarter on Tuesday following its first-quarter results.

Burry’s PayPal Rationale

Burry argued for the company’s long-term value creation potential, particularly through aggressive buybacks. PayPal repurchased roughly $6 billion in stock over the trailing 12 months, against a market capitalization of around $41 billion and no net debt, the contrarian investor said.

“Very large buybacks are not a story the market respects in low-growth names,” Burry said, comparing the setup to eBay, where sustained buybacks eventually boosted shareholder returns.

He also pointed to PayPal’s AI-led restructuring efforts. The company plans to generate at least $1.5 billion in gross run-rate savings over the next two to three years, including workforce reductions that could affect roughly 20% of employees.

“PayPal does not need nearly as many people as it has to run its business, and continued deployment of foundation models will accelerate workforce reductions,” Burry added.

“PayPal shares at current levels are in my view a long-term 16-17% CAGR investment given continued capital stewardship and renewed ROI-focused business investment under new management,” Burry said about the company. Meanwhile, PYPL stock has declined more than 31% in the past 12 months.

The investor also highlighted PayPal’s discounted valuation relative to fintech company Fiserv. “Fiserv trades a little rich (1.26x P/IV15, where IV15 is the 15% annualized returns price) to PayPal (0.88 P/IV15) but still at a price that implies strong double-digit returns going forward.”

PayPal’s Payment Platform

Burry also touted PayPal’s payments platform Venmo as central to the bull case. “Venmo is growing strong double digits and remains a pawn for value realization,” he said.

Lores recently reorganized the business into separate reporting divisions, including a standalone Venmo-focused segment, a move that came after widespread speculation about a potential sale of the platform to interested investors.

However, Lores has argued that PayPal’s main businesses are “stronger together” because they have overlapping customers and technology, and that this creates a “need to simplify” and “drive cost reductions” across its segments.

Meanwhile, on Stocktwits, retail sentiment on PYPL stock jumped from ‘neutral’ to ‘extremely bullish’ over the past 24 hours amid ‘extremely high’ message volumes.

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