1 Ridiculously Cheap Value Stock to Buy With $500 Right Now

Warren Buffett, the legendary capital allocator who has headed up Berkshire Hathaway for decades, helped popularize value investing. This strategy involves buying companies at a discount to their intrinsic worth, with the hope that the market will bid up their shares over time.

Even in today's market environment, in which valuations are at historically high levels, there are still opportunities to follow the Oracle of Omaha's successful investment philosophy. You just have to know where to look.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Here's one insanely cheap value stock that investors should consider buying with $500 right now.

New strategic focus

PayPal's (NASDAQ: PYPL) growth soared during the pandemic's worst days as digital payment activity soared and a larger share of people's shopping took place online. But the subsequent normalization of macro forces and consumer behavior has brought the business back down to Earth. Its slower growth has left investors less enthusiastic. PayPal's share price is currently 77% below the record high it touched in July 2021.

A new CEO, Alex Chriss, was brought aboard in September 2023 to orchestrate a turnaround. He didn't waste time making changes. Some notable product and strategic updates have been introduced following Chriss' arrival. Fastlane (one-click checkout), CashPass (cash-back rewards), and Smart Receipts (AI-powered merchant recommendations) are some examples that improve consumers' buying experience.

PayPal is also focused on its other key customer group: merchants. Last month, the business revealed PayPal Open, a platform for merchants of all sizes that not only facilitates payments, but allows these customers to access value-added services to promote growth.

In addition, PayPal is flexing its pricing power, adopting what's called a price-to-value strategy. The goal is to emphasize profitability over growth while being able to make money based on the value it provides customers. "This is a new PayPal," Chriss said during its investor day presentation last month. "We are transforming from a payments company into a commerce platform."

These innovations all sound good -- and they're exactly the kinds of moves one would want to see from a new leadership team that's trying to right the ship. At the end of the day, though, investors should care about how these changes will impact PayPal's financial performance over time.

On that front, the management team provided another reason to be upbeat. By boosting transaction margin dollars, controlling operating costs, and buying back shares, the overarching goal over the long term is to lift non-GAAP earnings per share growth to at least 20% per year.

Value hiding in broad daylight

There's no denying that the payments landscape is incredibly crowded. On both the consumer and merchant fronts, PayPal faces formidable opponents that have prowess in technology, payments, and financial services. All are aggressively courting new customers with the hope of boosting their transaction volumes over time.

To its credit, PayPal has been at the forefront of electronic payments for more than two decades. It has the scale ($1.7 trillion in total payment volume in 2024 and 434 million active accounts) to continue competing at a high level. And it has developed a strong brand, with a two-sided platform that benefits from a network effect, supporting its industry position.

The stock trades today at 14 times forward earnings, well below the market's average. That makes it a bargain deal that any value investor could get excited about. This is true even when considering the competitive nature of the industry.

It's difficult to pass up a profitable, growing, and innovative business with competitive advantages that's trading at such a cheap valuation. Of course, it's not certain that management will be able to achieve its earnings goal. But the risk-reward setup for investors warrants putting $500 into this fintech stock today.

Should you invest $1,000 in PayPal right now?

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Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and PayPal. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short March 2025 $85 calls on PayPal. The Motley Fool has a disclosure policy.