Traders Started Betting on PayPal's Rally Again

Key Points

• PayPal stock has fallen due to tariff fears, though this recent price action may prove to be a temporary one filled with upside potential.
• Wall Street analysts had no fear of remaining bullish on the business and its future.
• Bears decided to leave the stock as they face double-digit EPS growth in the coming quarters.

When retail investors watch recent buying and selling activity in the market, they typically can get a pretty strong view of what is happening behind the scenes at some of the industry’s largest funds and investment houses. However, reported institutional activity reflects the past, and not the recent one at that, so this information assumes the initial buy thesis has to still be valid for action to be taken on it.

There’s another, more efficient way to determine where the sentiment is today and where it might be headed in the future. By tracking unusual options activity, whether for put options (usually bearish) or for call options (usually bullish), investors know that the stakes are much higher due to the leverage and timing aspects associated with these financial products so that any big bet carries a lot more conviction than just buying shares of stock.

Today, unusual call option activity has been spotted inside the technology sector, specifically for one of the leading names in financial technology (fintech) across the globe. Enough reason to buy came into the decision-making process for these option traders, leading them to expect higher prices in shares of PayPal Holdings Inc. NASDAQ: PYPL. This view might land on the right side of history for reasons that will become clear in a minute.

A Temporary Tariff Scare

These traders may have had this in mind when they decided to plunge in with up to 124,040 call options as of April 2025. This volume represented a net increase of 35% compared to its usual volume of 92,203 call options, reiterating the view that there’s a strong sentiment change right now for PayPal’s future potential.

Understanding that President Trump's trade tariffs caused great uncertainty about the future of the global economy had a big impact on PayPal's shares, as they fell by as much as 25.5% over the past quarter alone. If trade volumes and so-called “globalization” contract, then PayPal’s fees and earnings are likely to go the same way.

However, as most of the countries in question have reportedly come to negotiate with the United States and its trade terms, certainty might be coming back to the table. This is good news for dip-buying investors looking to scoop up some of the stocks that have been affected by what will turn out to be a temporary bump in the road.

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When it comes to PayPal, this bet seems to be asymmetric, as the stock trades at 67% of its 52-week high price. This statistic might make some investors think that the downside scenarios may already be priced into the stock at this big of a discount, leaving them with mostly upside.

Higher Ceilings for PayPal Stock

Regarding the upside compared to today’s steep discount, investors can – and should – check where Wall Street analyst sentiment is going. Remembering that these analysts are usually weary of boosting a stock when it is beaten lower by the market, any positive regard for PayPal should be taken with a lot more than just a grain of salt.

Such as the view coming out of Monness Crespi & Hardt, whose analysts reiterated a Buy rating on PayPal stock as of April 2025. Not only did they remain bullish on the company after a bearish quarter price action, but they also saw a fair value of up to $90 per share on it.

From this perspective, investors can see how a $90 target would imply that PayPal stock needs to flirt with its 52-week high of $93 once more and potentially break past it. More than just a call for up to 44% upside from where the stock is today, proving this view could also trigger more momentum buyers to come into the scene and support the stock further.

Knowing that this setup favors the bulls in the equation, investors can see how much doubt has been instilled into the bears in real-time. Over the past month, PayPal stock’s short interest was reported to show a net decline of 11.6%, a clear sign of bearish capitulation as they face all of the positive factors in the company.

There’s also a fundamental driver to consider in PayPal’s future, and that is where Wall Street analysts see earnings per share (EPS) going in the coming quarters. As of today, these analysts seem okay with forecasting up to $1.39 in EPS for PayPal's business in the fourth quarter of 2025.

Compared to today’s reported $1.11 in EPS, this forecast calls for a jump of up to 25.5% to further justify the double-digit upside these traders and analysts have called for in their actions.