PayPal (NASDAQ:PYPL) at $67 vs Klarna (NYSE:KLAR) at $41 – Which Stock Has More Upside?

PayPal (NASDAQ:PYPL) vs Klarna (NYSE:KLAR) – September 2025 Comparative Analysis

Valuation and Market Performance

PayPal (NASDAQ:PYPL) trades at $67 per share, equating to a market capitalization near $64 billion. In contrast, Klarna (NYSE:KLAR) is priced at $41.12, with a market cap around $16.1 billion. On valuation multiples, PYPL looks deeply discounted with a forward P/E of 11.6x and EV/EBITDA of 9x, compared with KLAR at 5.6x sales and 30.8x EV/EBITDA despite continuing losses. The divergence highlights that PayPal, while mature, is currently far cheaper relative to its earnings power, while Klarna is priced more like a growth play with significant execution risks.

Revenue Growth and Business Mix

PayPal generated $8.29 billion in Q2 2025 revenue, a 5% year-over-year increase, putting it on track for $33.08 billion in 2025. Klarna, meanwhile, produced $823 million in Q2 2025, lifting its trailing twelve-month revenue to $3.01 billion, up nearly 21% year-over-year. Klarna’s growth rate is stronger, but its revenue base is just 10% of PayPal’s scale. PYPL benefits from a diversified ecosystem—merchant payments, Venmo, Buy Now Pay Later (BNPL), and cross-border volumes—while Klarna remains heavily dependent on BNPL fees and merchant advertising.

Profitability and Margins

PayPal reported $1.26 billion net income in Q2, with an operating margin near 19% and a net margin at 14.5%. Klarna, in comparison, remains unprofitable with a –3.17% profit margin and net losses of $95.4 million over the last twelve months. While Klarna has narrowed losses since 2023, provisions for credit losses surged to $174 million in Q2, eroding operating leverage. PayPal’s EBITDA stood at $1.84 billion last quarter, dwarfing Klarna’s $364 million TTM EBITDA, underscoring the maturity gap.

Customer Base and Merchant Ecosystem

Klarna has grown rapidly to 111 million active users and nearly 800,000 merchants, with GMV climbing to $31.2 billion in Q2. Its U.S. expansion has boosted merchant take rates to 2.7%, but also exposed the firm to higher credit losses of 1.4% of GMV compared to just 0.2% in its European markets. PayPal commands 438 million active accounts, with monthly active users at 226 million, and processes quarterly TPV of $443.6 billion, more than 14x Klarna’s volumes. PYPL also benefits from its Venmo franchise, with “Pay with Venmo” up 45% year-over-year, and Buy Now Pay Later volumes rising 20%.

Balance Sheet and Cash Flow Strength

PayPal’s operating cash flow stood at $898 million in Q2, depressed by working capital shifts but adjusted OCF reached $1.88 billion. Klarna holds $6.74 billion in cash against $814 million in debt, supported by $14 billion in deposits in Europe, but its levered free cash flow remains deeply negative at –$1.73 billion. While both companies are investing in growth, PayPal has robust free cash flow generation to fund buybacks and expansion, while Klarna is more reliant on deposits and capital markets.

Capital Allocation and Insider Trends

PayPal is executing an aggressive buyback program, committing $6 billion in 2025 alone, and has retired nearly 25% of shares since 2022. This capital return strategy is a key driver of EPS growth. Insider transactions show occasional selling, but institutional ownership above 80% reinforces confidence. Klarna insiders, led by its founder Sebastian Siemiatkowski, retained super-voting rights, while early investors like Sequoia sold into the IPO. KLAR insider activity reveals limited open-market buying, which may pressure sentiment compared to PYPL’s shareholder-friendly actions.

Growth Outlook and Price Forecasts

PayPal is projected to generate $5.21 EPS in 2025, rising further in 2026, with revenue climbing to $35 billion. Analysts see PYPL fair value near $82.50 on average, with bull cases above $120. Klarna forecasts $3.64 billion revenue in 2025 and $4.61 billion in 2026, implying 26% growth, but with EPS losses persisting. Price targets for KLAR range $38–$55, modest upside from current levels, while its private-market peak at $45 billion is far out of reach.

Investment Verdict – PYPL vs KLAR

At $67, NASDAQ:PYPL is undervalued on both earnings and cash flow, with consistent profitability, strong buybacks, and broad merchant adoption. At $41, NYSE:KLAR offers growth exposure in BNPL but remains speculative, with high credit risk, negative free cash flow, and expensive multiples relative to its fundamentals. For investors seeking near-term value and capital return, PayPal is a Buy, while Klarna is a cautious Hold, best suited for those willing to wait for profitability milestones and credit stabilization.

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