PayPal: Why I Still See A Buy After Stripe Walked Away

The analyst maintains a Buy rating on PayPal with a 12-month price target of $66, arguing shares are undervalued at about 9x forward earnings despite business headwinds and a failed $60.50-per-share takeover bid. Robust buybacks, stable free cash flow and a falling share count support the case, while Venmo is projected to grow 2025 revenue 20% and Braintree profitability is improving.

Analysis

The discount is only attractive if earnings are durable: a low forward P/E can be a value trap when branded-checkout engagement or monetization is eroding. Buybacks amplify per-share value when repurchases are below intrinsic value, but can instead mask flat or falling operating earnings; track constant-currency revenue, transaction margin dollars, and diluted share count together. Venmo growth matters only if monetization converts to incremental profit, while Braintree’s margin improvement should be checked against volume and merchant retention—pricing discipline that loses attractive merchants would weaken the thesis. The rejected bid is not a price floor: absent evidence of a continuing buyer, it may anchor investors to a control premium that public shareholders cannot realize.

Near term, the failed deal can limit takeover-driven upside. Over the next 1–3 months, guidance and evidence of branded-checkout stabilization matter more than headline growth in adjacent products. Over 6–18 months, sustained cash generation and profitable Venmo/Braintree expansion could support rerating; continued checkout share loss would make buybacks increasingly defensive. The contrarian opportunity is that investors may underprice successful execution outside branded checkout—but the article’s growth and valuation assertions need verification against reported segment economics and current consensus estimates.

Key Decisions for Investors

• Treat PYPL as a conditional value position, not a takeover-arbitrage trade. Consider building exposure only after verifying current valuation, cash conversion, and that transaction margin dollars are stabilizing; no price entry can be set from the supplied information.
• For the next earnings cycle, monitor branded-checkout performance, Venmo monetization/profit contribution, Braintree transaction volume alongside margin, and buybacks versus diluted share count. Favor evidence of profitable growth over payment-volume growth alone.
• Falsify the long thesis if management cuts outlook, transaction margin dollars weaken persistently, or Venmo/Braintree growth fails to translate into profit while branded checkout continues to deteriorate. Reassess if reported free cash flow diverges materially from earnings.
• Verify the failed bid’s terms and whether any credible buyer remains before assigning takeover value. Without follow-through, do not use the bid price as a downside floor; if the stock rallies mainly on renewed deal speculation without operating improvement, trim rather than chase.