Morningstar

PayPal: Deal with Stripe Is Apparently Off

While we appreciate the headwinds the company faces, we think PayPal can generate modest growth and stable margins over the long run.

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Securities in This Article
PayPal Holdings Inc
(PYPL)

Key Morningstar Metrics for PayPal Holdings

  • Fair Value Estimate
    : $80.00
  • Morningstar Rating
    : ★★★★
  • Morningstar Economic Moat Rating
    : Narrow
  • Morningstar Uncertainty Rating
    : High

Bloomberg has reported that Stripe and Advent are no longer in talks to buy PayPal Holdings PYPL. In reaction, PayPal’s shares were down 11% in trading on Aug. 28.

Why it matters: Stripe and Advent reportedly offered to buy PayPal for $60.50 per share.

  • According to reports, PayPal management considered this offer too low, and we would agree.
  • There was speculation that the companies were haggling over the price, but it appears they could not find a mutually agreeable figure.

The bottom line: We will maintain our $80 per share fair value estimate for PayPal, which is based on its stand-alone value, and see shares as undervalued.

  • While we appreciate the headwinds the company faces, we think PayPal can generate modest growth and stable margins over the long run, and that the current market price implies an overly pessimistic long-term view.
  • While it is still very early, we think results under new CEO Enrique Lores have been largely positive so far, which inspires some confidence in his ability to effect a turnaround.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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