PayPal Holdings (PYPL) is back in focus after Stripe and private equity firm Advent International reportedly submitted a confidential $53b takeover proposal, offering $60.50 per share, a 28% premium to PayPal’s mid July closing price.

At a share price of $56.15, PayPal Holdings has seen a 30 day share price return of 32.18% and a 90 day share price return of 11.23%, yet its 1 year total shareholder return is down 27.37%. This suggests that recent momentum contrasts with a weaker longer term record as takeover speculation and upcoming results reset expectations.

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PayPal Holdings still runs a large, global payments platform, yet the stock has swung from former market favorite to takeover target in a short span. After this sharp move, is the business quality fairly reflected in today’s price?

Most Popular Narrative: 13.6% Undervalued

Against a last close of $56.15, the most followed narrative for PayPal Holdings points to a fair value of $65, implying meaningful upside if that view proves accurate.

The market prices PayPal (approximately 8x earnings) as a structurally dying payments company. The numbers show something else: approximately $6.8b in annual free cash flow, a net cash balance sheet, hundreds of millions of active accounts, and total payment volume that is still growing.

Read the complete narrative. Read the complete narrative.

According to benjamin_lvieq, this valuation hinges on PayPal Holdings stabilizing its core checkout business, keeping margins resilient, and continuing to reduce its share count at scale.

Result: Fair Value of $65 (UNDERVALUED)

However, PayPal Holdings still faces pressure on higher margin checkout and signs of softer user activity. Further erosion in these areas could quickly undermine this undervaluation case.

Next Steps

With sentiment on PayPal Holdings split between opportunity and concern, it makes sense to act quickly and review the numbers yourself before opinions harden. To see both sides clearly, weigh up the 3 key rewards and 1 important warning sign

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.