Morgan Stanley Says Stripe-Advent Deal Is PYPL's 'Most Credible' Path To Value Realization After PayPal Board Reportedly Deems Offer Inadequate

• Morgan Stanley said that it does not see other realistic catalysts for PayPal that are capable of driving a sustained reacceleration in revenue and earnings growth.
• The firm maintained its ‘Underweight’ rating and $34 price target for PayPal shares, implying a downside of about 39% from current levels.
• Analysts at Cantor Fitzgerald echoed the PayPal board’s reported sentiments, saying that their sum-of-the-parts analysis suggests a $70-per-share offer would more accurately reflect PayPal's intrinsic value.

Morgan Stanley believes a sale to a consortium led by Stripe and Advent International represents PayPal Holdings Inc.’s (PYPL) most compelling path to unlocking shareholder value.

This comes amid a Reuters report on Thursday that stated that PayPal’s board views the $53 billion takeover proposal as inadequate and is weighing concerns over valuation, financing and regulatory hurdles.

PayPal shares were down more than 1% in Friday’s opening trade.

Morgan Stanley Sees Few Standalone Growth Catalysts For PYPL

According to TheFly, Morgan Stanley said a sale to the Stripe-Advent consortium is likely “the most credible path to value realization” for PayPal and its shareholders, citing what it views as the company's limited ability to meaningfully accelerate growth on its own.

While the firm acknowledged that PayPal’s management can continue pursuing cost efficiencies and product improvements, it argued those measures alone are unlikely to materially change the company's long-term growth trajectory.

Morgan Stanley added that it does not see any other realistic catalysts for PayPal capable of driving a sustained reacceleration in revenue and earnings growth.

The firm maintained its ‘Underweight’ rating and $34 price target for PayPal shares, implying a downside potential of about 39% from current levels.

Analysts at Cantor Fitzgerald echoed the PayPal board’s reported sentiments, saying that their sum-of-the-parts analysis suggests a $70-per-share offer would more accurately reflect PayPal's intrinsic value, while adding that the proposed valuation from Stripe and Advent may be too low.

The firm maintained its ‘Neutral’ rating and $54 price target, adding that the reported bid is likely an opening offer rather than the consortium's final proposal.

Barclays Says M&A Speculation Limits Downside For PYPL

Barclays turned less bearish on PayPal following reports that Stripe and Advent are pursuing a takeover of the payments company.

The firm upgraded PayPal to ‘Equal Weight’ from ‘Underweight’, with a $55 price target on the shares. Barclays said that while PayPal’s underlying fundamentals remain unchanged, the ongoing acquisition speculation reduces the likelihood of significant downside in the near term.

While Barclays cautioned that conflicting media reports and the lack of confirmation from the companies involved add uncertainty to the situation, it said the potential for a deal has become an important factor in the stock’s risk-reward profile.

What Retail Traders Think Of PYPL Stock

Retail sentiment on Stocktwits around PayPal trended in the ‘extremely bullish’ territory, with message volumes at ‘extremely high’ levels at the time of writing.

PYPL stock is down 4% year-to-date and 24% over the past 12 months. The Vanguard Total Stock Market Index Fund ETF (VTI) and the Vanguard S&P 500 ETF (VOO) are up 19% over the past 12 months.

The Invesco QQQ Trust (QQQ) is up 24% during this period.

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