Michael Burry Sounds the Alarm on Payments Sector – XYZ, PYPL, FOUR

The Big Short investor Michael Burry published an 8,000-word analysis on the payments sector, with a focus on Block (XYZ), PayPal (PYPL), and Shift4 (FOUR). He argued that the sector exhibits 'minimal organic growth' and relies on acquisition-driven expansion, in his Substack post.Claim 70% Off TipRanks PremiumUnlock hedge fund-level data and powerful investing tools for smarter, sharper decisions Stay ahead of the market with the latest news and analysis and maximize your portfolio's potential Burry contends that several firms in the space use "accounting tricks and misrepresentations" to inflate earnings, making much of the sector a high-risk, "too hard" universe for long-term value investors. These Are Burry's Key Findings Minimal organic growth – Burry noted that growth within payments companies largely stems from acquisitions rather than internal expansion. This pattern signals structural barriers to sustained revenue and margin growth. Acquisition-driven growth and market skepticism – Burry believes that the stock market disfavors growth stories built on frequent acquisitions. They are viewed as signs of slow organic progress and potential overpayment for targets. Accounting and transparency concerns – Burry alleges that certain firms use "M&A accounting tricks and misrepresentations" to bolster earnings and mask weak profitability and cash flow. Burry's Take on Payments Companies PayPal – Burry expresses skepticism regarding PayPal's pricing power and corporate culture, suggesting that reported earnings exceed sustainable cash generation. He stated that PYPL is incompatible with his value-investing framework and heightens risks to long-term shareholder value. Shift4 – Burry stated that he would consider the stock at $30 per share, which implies a heavy discount from the current trading level of $65.91 per share. He cited governance concerns but also acknowledged that Shift4's internal R&D efforts are not without merit, though they may not offset broader structural risk. Block – Burry acknowledged that Block has certain favorable aspects and credible management. He warns that the remaining uncertainties and details do not present a compelling value proposition for him at current levels. For context, XYZ stock is trading close to $65 per share, at a major discount to its all-time high of $94.25. Ending Thoughts To conclude, Burry advises investors to label the payments sector in the "too hard" pile and pivot elsewhere, given the sector's heavy reliance on acquisition-fueled growth strategy that undermines sustainable value creation. We used the TipRanks Stock Comparison Tool to see how these companies perform on different parameters. Currently, Wall Street has assigned a "Strong Buy" consensus rating to Block stock, while they remain cautiously optimistic about Shift4 and stay sidelined on PayPal.