Shares of PayPal Holdings (PYPL 2.99%) dropped 20% in February, according to data provided by S&P Global Market Intelligence. The company's fourth-quarter report contained some good news and some bad news, and the market was focused on the bad part.

Mixed signals

PayPal has struggled over the past few years as competition has made inroads into developing rival fintech businesses, and profitability has declined. It hired a new CEO last year, Alex Chriss, and there's been a good amount of change taking place.

Some of the updates involve product changes. For example, it has launched several new features that streamline and speed up the buying process, like Fastlane, which saves payment info and allows customers to pay with one click. Other updates include operational changes like the all-important pricing to value that Chriss has been speaking about for a while.

There was slow but steady progress in the 2024 fourth quarter. Total payment volume increased 7% year over year, and revenue was up 4%. Management has been highlighting transaction margin dollars, which increased 7% year over year in the fourth quarter and demonstrates progress in fixing its unbranded checkout business. The unbranded checkout is the Braintree business, a white-label payments infrastructure.

Much of PayPal's growth over the past few years has been driven by Braintree, but since it's a wholesale business of sorts, it has lower margins than the PayPal-branded business. Chriss has been working to get more value out of this business, and it's getting there. However, the flip side is that payment processing in the unbranded checkout is slowing down, increasing 2% year over year.

Active accounts increased 2% year over year to 434 million, and monthly actives were also up 2% to 223 million. That could be attributed to PayPal's new and improved products and features, and it's a turnaround from numbers that had started to decline. Earnings per share (EPS) increased 5% year over year in the quarter, reflecting the work management is doing to become more efficient.

Is PayPal stock a bargain?

At the current price, PayPal stock trades at a forward one-year price-to-earnings (P/E) ratio of 12. That's incredibly cheap, and it underscores how little the market thinks of PayPal stock right now.

The company is making progress on its goals and is still the leader in its industry. You can take a small position right now on confidence in a rebound, but it may take a while.