- Mizuho said PayPal is "deeply undervalued" at current valuations, given that it is one of the four globally recognized payment networks.
- Raymond James said that the details are limited, but the most plausible buyers appear to be mega-cap tech firms.
- Wolfe Research said that a takeout multiple "could be at a few turns higher" than the company's current valuation.
PayPal Holdings, Inc. shares jumped nearly 6% on Monday, marking their best single-day performance since April last year, after reports of takeover interest surfaced following a bruising stretch for the stock. Now, Wall Street is already abuzz with predictions about where a mega offer could emerge from.
Shares are down nearly 25% so far this year, pressured by quarterly results that missed Wall Street expectations and uncertainty surrounding leadership changes. Enrique Lores, currently CEO of HP Inc., has been named PayPal’s next chief executive, succeeding Alex Chriss, and is set to assume the role formally in March.
Wall Street Sees More Value In PayPal
Mizuho reiterated an ‘Outperform’ rating on PayPal with a $60 price target, according to The Fly, following a Bloomberg News report that the company is attracting takeover interest. The firm noted that PayPal is "deeply undervalued" at current valuation levels, given that it is one of the four globally recognized payment networks.
PayPal Holdings, Inc. is currently trading at a forward price-to-earnings (P/E) ratio of 8.3x, according to Koyfin — well below Mastercard Incorporated at 25.4x, Visa Inc. at 23.2x, and Block, Inc. at 17.1x.
Despite the valuation gap, Mizuho continues to see value in PayPal shares. The company’s market capitalization currently stands at about $40.56 billion, down from $54.41 billion at the end of last year.
Who Is Interested In PYPL?
According to Bloomberg, the company is seeing interest from banks and also a larger rival, with some parties potentially targeting the whole company and others specific assets. Raymond James said that the details are limited, but the most plausible buyers appear to be mega-cap tech firms such as Alphabet (GOOGL), Meta (META), Amazon (AMZN), Microsoft (MSFT), and Apple (AAPL).
Raymond James noted that a private equity deal seems unlikely given the $50 billion size, and a bank acquisition also appears improbable. The probability of an outright sale looks low, and a transaction would not necessarily resolve PayPal's underlying challenges, particularly ongoing share loss in Branded, though the reported interest is not entirely surprising.
Wolfe Research said that a takeout multiple "could be at a few turns higher" than the company's current valuation. Even Wolfe expects large e-commerce acquirers to acquire PayPal's scaled two-sided ecosystem and cross-sell tech and value-added services to the merchant base. The firm noted that PayPal could also see interest from physical merchant acquirers looking to gain an e-commerce presence and tech platforms with large consumer networks looking to bring payments in-house.
How Are Stocktwits Users Reacting?
Retail sentiment on PayPal jumped to ‘extremely bullish’ from ‘bearish’ territory a day ago, with message volumes at ‘high’ levels, according to data from Stocktwits.
A user on Stocktwits said that most of the investors are holding over $70 and would not approve the sale unless they get at least a 20% return.
A bullish user on the platform said the company could be acquired at $57 or $66 per share, based on the premium that big tech companies typically get in a takeover. The higher end of the range here is a 50% upside to the last closing price of $44.05.
Shares of PayPal have declined nearly 41% in the last 12 months.
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