TLDR
- Stripe and Advent International walked away from a reported $53 billion PayPal acquisition in late August after the board rejected the offer
- CEO Enrique Lores says PayPal remains “open and objective” to evaluating external offers but believes the current standalone plan creates more value
- The turnaround plan includes $1.5 billion in cost savings and a $6 billion share repurchase program
- PayPal stock trades at $53.31, down 81% over five years, with analysts holding a consensus “Hold” rating and a $56.03 price target
- Q2 earnings came in at $1.38 EPS on $8.68 billion in revenue, both above analyst expectations
PayPal (PYPL) stock opened at $53.31 on Friday after buyout talks with Stripe and Advent International fell apart in late August.
PayPal Holdings, Inc., PYPL
The two parties reportedly offered around $53 billion, or $60.50 per share, but PayPal’s board rejected the deal. It has been speculated the board was looking for closer to $70 per share.
CEO Enrique Lores, speaking at the Goldman Sachs Communacopia & Tech Conference, said the company remains open to external offers but believes executing its own plan is the better path right now.
“We will always choose whatever provides more value,” Lores said. He took over as CEO in March after previously leading HP Inc. through a turnaround.
The stock has dropped sharply since the deal collapsed, and is down 81% over the past five years. Its 12-month range sits between $38.46 and $79.21.
The Turnaround Plan
PayPal’s standalone strategy centers on three dedicated business units and a consolidation of legacy platforms including Braintree, Hyperwallet, and PayPal Complete Payments.
The plan targets $1.5 billion in annualised cost savings and a $6 billion share repurchase program. Lores has been clear that results from this effort are not expected before 2027 at the earliest.
The company also recently launched PYUSDx, a developer platform tied to its PYUSD stablecoin. Three projects using the platform have already processed more than $100 million combined.
PayPal paid a quarterly dividend of $0.14 per share on September 25, with a payout ratio of 10.59%.
What Analysts Are Saying
Wall Street is largely sitting on the fence. Of analysts covering PYPL, nine have a Buy rating, 34 have a Hold, and four have a Sell.
JPMorgan raised its price target from $46 to $65 in late July but kept a “neutral” rating. Citigroup also moved its target from $48 to $61, also neutral. Mizuho set a $51 target in August.
Jefferies upgraded PYPL from Hold to Buy on July 28. The consensus target stands at $56.03.
Q2 results came in ahead of expectations. EPS was $1.38 versus the $1.28 consensus. Revenue of $8.68 billion beat the $8.47 billion estimate, up 4.8% year over year.
Institutional investors hold 68.32% of the stock. Ameritas Advisory Services bought a new stake worth $1.28 million in Q2.
Two insiders sold a combined $443,921 worth of stock on September 3, both under pre-arranged Rule 10b5-1 plans. The stock’s PE ratio sits at 10.08.
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