Wed, Jun 3, 2026|Whitney Tilson

A first look at PayPal; Farewell to Lamu, Kenya

The beaten-down stocks of high-quality, high-margin, high-cash-flow companies can rebound sharply if there's even a small change in investor sentiment...

As I discussed in yesterday's e-mail, software companies Intuit (INTU), ServiceNow (NOW), and Salesforce (CRM) are good examples of this phenomenon.

Today, let's look at another candidate that meets this description: payment company PayPal (PYPL).

First off, its stock chart is ugly...

After PayPal spun off from eBay (EBAY) in 2015, the stock skyrocketed nearly 10-fold for six years. It then crashed over the past five years and is now almost back to its price from 11 years ago:

Despite the stock's trajectory, PayPal certainly qualifies as a high-quality business. We can see this by analyzing its financials...

While its gross margins have declined over time, they've stabilized in recent years. And its operating margin has risen, reaching a healthy 18.2% in the latest quarter:

PayPal has also grown both its revenues and operating income at a high and steady rate over an extended period:

The business has very low capital expenditures ("capex") and generates lots of free cash flow ("FCF"):

As for how it allocates this FCF, PayPal made a number of acquisitions in its early years and pays a small 1.3% dividend today. But mainly, it has become a share-repurchase machine in recent years:

In fact, share repurchases have outpaced FCF. The company has gone from having $7.1 billion of net cash in 2018 to $2.3 billion of net debt today – a tiny amount equal to less than five months' worth of FCF:

These share repurchases have reduced its diluted share count by 20% in the past four years (which, mathematically, increases earnings per share by 25%):

In summary, PayPal has exceptionally strong historical financials: high margins, growth, and FCF, a strong balance sheet, and smart capital allocation.

Despite this, the stock has been obliterated. At yesterday's closing price of $44.53, it trades at a mere 8.4 times this year's consensus earnings estimates of $5.30 per share.

That's a small fraction of the S&P 500 Index's multiple of 22 times. And it's within a whisker of PayPal's all-time low, as you can see in this long-term chart of forward price to earnings (P/E):

This is a low multiple for such a high-quality business, which has caught the eye of many smart investors.

I'll share the bull cases from two of them in tomorrow's e-mail, so stay tuned!

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.

P.P.S. My parents and I spent the past two days at their beach house in Lamu, Kenya, which they just sold. After 20 years of wonderful memories, we said goodbye to it for the last time today and flew back to Nairobi. Here are some pictures:

Subscribe to Whitney Tilson's Daily for FREE

Get the Whitney Tilson's Daily delivered straight to your inbox.

Tue, Jun 2, 2026 | Whitney Tilson

Berkshire Hathaway's two new investments – and what they mean for the stock; Updates on Willis Lease Finance, Intuit, ServiceNow, and Salesforce

1) Berkshire Hathaway (BRK-B) has been in the news over the past few days thanks to two announcements... First, it's paying $8.5 billion to acquire Taylor Morrison Home (TMHC), America's sixth-largest homebuilder. That amounts to $72.50 per share in cash, a 24% premium to Friday's close price. In addition, Berkshire is investing $10 billion in Alphabet (GOOGL) via a private placement. Here's my friend Doug Kass's take on it: Half of Berkshire's investment is common stock, paying $351.81 per share – a $25 discount from the close. The other half is in capital stock, a preferred (fixed income paper). This […]

Mon, Jun 1, 2026 | Whitney Tilson

Updates on Willis Lease Finance, Alphabet, Walmart, Costco Wholesale, Amazon, and Palantir Technologies

Today, I'd like to share some quick updates on a number of companies I've covered before... 1) I continue to be bullish on aircraft-engine lessor Willis Lease Finance (WLFC) for reasons I've outlined in many previous e-mails (archive here). This Financial Times article reinforces my view that the engines Willis owns are worth far more than what the company is carrying them for on its books: Companies that lease aircraft to airlines have in some cases begun leasing engines rather than whole planes as an industry-wide shortage has sent their rental values soaring. The recent grounding of Spirit Airlines in […]

Fri, May 29, 2026 | Whitney Tilson

A first look at Intuit

My Stansberry's Investment Advisory team and I continue to look at the beaten-down software sector, which has been pummeled by the "SaaSpocalypse." In my April 28 e-mail, I wrote about Software as a Service ("SaaS") company ServiceNow (NOW), which my team and I did a deep dive on in March...

Thu, May 28, 2026 | Whitney Tilson

Tesla's AI trainers don't trust its full self-driving tech or safety stats; I appeared on Wall Street Week to discuss Mayor Zohran Mamdani; This Joby Aviation executive is top-notch

1) Reuters just published a devastating article about Tesla (TSLA), which I named as one of my "Stinky Six" stocks to avoid in my October 29 e-mail (since then, it's down 5% versus a 9% jump for the S&P 500 Index)... The article exposes what I think is massive fraud at multiple levels: on customers, regulators, and investors. It highlights why AI trainers don't trust Tesla's full self-driving ("FSD") technology – or its safety stats: Tesla CEO Elon Musk says FSD will soon make all Teslas fully autonomous. But interviews with nine former labelers and a former Tesla self-driving engineer […]