PayPal has been out of favor with Wall Street following a couple of lackluster earnings reports. But Amazon could help lift the online payments company later this year by accepting payments with PayPal-owned Venmo in its online stores.

"PayPal's 25% stock drop where it ended the day in a 52-week low could be offset by the new business partnership between Amazon and Venmo, another pay service owned by the money servicing giant," said Baruch Labunski, CEO of Rank Secure.

Venmo is popular with younger generations, and the adoption of the product by Amazon could help bring the buzz back to the online payments company.

"PayPal-owned Venmo is incredibly popular with Gen Y and Gen Z. Offering Venmo payment is an example of making it easier for an entire generation of customers that use Venmo as their primary transaction vehicle," said Gregory Ng, CEO at Brooks Bell.

Online payment systems are conducive to economies of networking where the value of the network per user increases with the size of the network, leading to a winner-take-all situation.

Still, Labunski is skeptical about whether the Amazon-Venmo deal will help PayPal regain momentum.

"Whether the business deal lifts PayPal out of the stock slump depends on which narrative is true about its low performance," he said. "The official reason for PayPal's dismal performance is higher inflation affecting consumer spending. Its 2022 forecast said to expect the same. If true, Amazon's move to accept Venmo won't make much difference."

On the other side, "if PayPal customers are dumping the payment option in favor of another like Venmo, then Amazon offering it could help raise PayPal's revenue. Many moved to Venmo instead of PayPal without knowing PayPal owns Venmo," he added.

Bob Bilbruck, CEO at Captjur, doesn't think that the Amazon deal is a game-changer for PayPal.

"PayPal has continued to provide themselves self-inflicted wounds. It's nice for the users to have the flexibility to pay for their Amazon purchases with Venmo, but it's not a game-changer, and it isn't going to help PayPal get back on track," he said. "PayPal faces some hefty, short-term headwinds as they need to fully transition from the eBay anchor, and they need to get rid of more illegitimate accounts plaguing the platform [4.5 million illegitimate accounts reported in their last earnings report.]"

That's thanks to the growing scrutiny of online transactions by regulators.

"Most of these are accounts they would have been fine with in the past, but with more regulation and scrutiny ... because of the focus on cryptocurrencies and other blockchain-based finance, they are forced to address these now, and it dragged on their bottom line," added Bilbruck.

Getting rid of all these accounts has not been that bad for the company's performance. PayPal's economic value added, a measure of how effectively the company manages capital, has risen from 3% in 2016 to 20% in 2022, the highest ever in the company's history, according to GuruFocus.com estimates.

According to the same site, the company's shares are significantly undervalued. On Feb. 5, PayPal's share price was $126.08, well below its $210.20 intrinsic value. And that makes the company's shares prime for bargain hunters.

Editor’s Note: Panos Mourdoukoutas owns shares of Paypal.

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