Michael Burry identifies PayPal as top software-payments bet based on stock-based compensation and valuation

PayPal shares are a top pick in Michael Burry's software-payments universe, ranking ahead of Fiserv and Adobe. The selection is based on stock-based compensation practices, accounting for future LLM and agent adoption, and a discounted owners' earnings valuation. Burry initiated a 3.5% position in PYPL at $49, targeting a 15% annualized long-term return.

The investment comes as software stocks have faced a decline driven by a private-credit risk loop. Burry describes this a "reflexive positive feedback loop" between falling software equities and the market for their bank debt. Private credit accounted for 30% of the U.S. leveraged finance market in 2025. Morgan Stanley expects private-credit defaults to reach 8% between late 2026 and early 2027, led in part by stress in software portfolios. Burry believes these technical pressures brought on by private credit and software debt issues are not big enough to affect stocks for much longer.