PayPal vs Adobe: Burry Bought Both, but for Opposite Reasons

Michael Burry bought PayPal and Adobe in the same quarter. They sit in the same "beaten-down" bucket but the thesis behind each is almost the inverse of the other.

PayPal is a case where the multiple imploded while the business kept producing cash. Adobe is a case where the business genuinely decelerated, but margins and free cash flow held up — or even improved. Looking at them side by side makes the contour of a "Burry buy" sharper.

Starting points

Metric	PayPal	Adobe
Drawdown from peak	over -80%	about -64% (700 → 255)
Market cap	~$43.7B	(large-cap range)
5-yr avg FCF	~$5.3B/yr	Robust, exceeds net income
P/FCF	~7.5x	High single digits
8-pillar check	8/8 pass	Misses on growth
5-yr revenue consensus	2.5% → 11.6%	High single digits
5-yr buyback	-21% shares outstanding	Consistent

PayPal — multiple compression

PayPal beat both revenue and earnings last quarter, but the guide didn't clear the bar so the stock dropped 10%. The market is pricing "growth is done." The numbers say otherwise.

• $43.7B market cap, $5.5B FCF last year
• 5-year average FCF of $5.3B
• Solid returns on capital, P/FCF in the high single digits
• Venmo transactions +14% year over year
• PEG below 1 — a strong signal that growth is cheap relative to price

A company at 7.5x FCF that has retired 21% of its share count over five years is in the golden zone for buybacks. Even modeling conservative growth at 2/4/6%, margins at 14/16/18%, and exit P/E at 13/17/21x, intrinsic value lands somewhere between $60 and $150. The stock is at $46.

Adobe — growth deceleration

Adobe is the opposite picture. It misses on parts of the 8-pillar screen because revenue growth has cooled from double digits to high single digits. It is also the cleanest case of "AI is going to eat my workflow" fear in the entire software space.

Yet free cash flow still exceeds net income. That signals plenty of accounting expenses that are not actual cash outflows. Even with conservative revenue growth assumptions of 3/6/9%, intrinsic value comes out in the $400 to $550 mid-range. With the stock at $255, the potential return profile rhymes with PayPal's.

Same conclusion, different paths

One-line theses:

• PayPal: business intact, market priced in "growth is over." The compounding effect of buybacks is at its most powerful here.
• Adobe: business has truly slowed, but the stock fell more than the slowdown justifies, and margins / cash flow held up.

A friend reportedly said "Adobe's business is clearly worse." You can call growth dropping from 15% to 12% "worse." Whether that decline justifies a -64% drawdown is a different question — and that gap is exactly where contrarians live.

Burry bought both names in the same quarter but he is really betting on two different mispricings. Two stocks tagged with the same "beaten-down" label often deserve to be unpacked separately.