PayPal Stock Gains After Beat-And-Raise — Why Wall Street Isn’t Chasing Buyout Hopes Like Retail

• PayPal delivered second-quarter earnings and revenue beat and raised its full-year guidance.
• Morgan Stanley and BTIG said PayPal’s improving fundamentals support its transformation plan, with neither expecting a near-term takeover.
• On Stocktwits, retail traders said PayPal’s stronger earnings and ongoing share buybacks justify valuations well above the rejected offer, with some estimating a potential buyout price of around $82.

Shares of PayPal Holdings Inc. (PYPL) gained nearly 5% on Tuesday after the company reported a beat-and-raise second quarter. While Wall Street analysts remained focused on PayPal’s ongoing transformation strategy and said a near-term buyout is unlikely, Stocktwits retail traders continued to speculate that the payments company could command a significantly higher takeover price following the strong results.

PYPL shares ended Tuesday’s regular session around 4% higher, but in after-trading, the stock was down 0.18% at the time of writing. 

Morgan Stanley Sees Turnaround For PYPL, Not Buyout

Morgan Stanley maintained its ‘Underweight’ rating on PayPal following the second-quarter report, saying the company declined to comment on reported deal speculation and believes executing its internal transformation strategy can create “significant value” for shareholders, according to TheFly.

The brokerage said PayPal’s improved branded checkout outlook, along with its raised full-year guidance, points to growing management confidence. It added that the company appears to be stabilising rather than facing immediate pressure to pursue a transaction.

BTIG Says PYPL Isn’t Headed For A Near-Term Takeover

BTIG also maintained a ‘Neutral’ rating after describing PayPal’s results as a “solid beat-and-raise across the board.” The brokerage stated that management said the board is “open and objective” to maximising shareholder value but remains focused on executing its transformation plan. BTIG added that it does not expect a takeout in the near term, according to TheFly.

Earlier this month, payments giant Stripe Inc. and private equity firm Advent International made a joint offer to acquire PayPal for $60.50 per share, valuing the company at more than $53 billion, but PayPal viewed the proposal as too low.

PYPL Stock: Stocktwits Retail Traders Bet On Higher Buyout Value

On Stocktwits, retail sentiment for PayPal improved to ‘neutral’ from ‘bearish’ over the past 24 hours, while message volume climbed to ‘high’ from ‘low’. In the past 30 days, message volume around the stock has surged 2,933%, while the ticker’s watcher base has increased 0.4%.

Retail traders welcomed PayPal’s earnings and revenue beat alongside its raised full-year guidance. One retail trader on Stocktwits said PayPal's strong results could lift the stock to $60 in the near term and eventually above $80 “without any buyout.”

Others continued to speculate on a richer takeover premium after the company rejected the $60.50-per-share offer.

A trader said PayPal could command a buyout price of around $82, adding that the company's earnings beat, raised guidance and ongoing share buybacks have strengthened its valuation beyond the earlier $60.50-per-share offer.

Another trader said $82 is the price at which the board would be willing to sell the company, adding that the timing of any deal remains uncertain.

PYPL stock has lost around 2.4% year-to-date.

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