PayPal posted steady revenue growth and continued heavy buybacks in its latest quarter, and Motley Fool contributors Lou Whiteman and Matt Frankel say the results give the company no reason to accept Stripe's takeover bid at its current price. Whiteman argues the $53 billion offer from Stripe and private equity firm Advent International still falls well short of what investors want.
PayPal's revenue rose 5% year over year, and the company kept buying back stock at a pace that has cut its share count by about 10% over the past year. Motley Fool contributor Lou Whiteman said the quarter gave PayPal no grounds to take a bargain buyout price just to exit the business. Earnings per share dipped slightly but still beat estimates, while total payment volume climbed 10%.
Venmo and buy now, pay later drive growth
Venmo posted 14% payment volume growth year over year, which Matt Frankel said accounted for the lion's share of PayPal's overall gains. Buy now, pay later volume rose 26% over the same period. PayPal generated $1.83 billion in free cash flow during the quarter and continues to spend roughly $6 billion a year on buybacks. On the earnings call, executives also laid out a three-year growth plan running through 2028.
Stripe's offer stays below PayPal's target
Stripe and Advent International, which split the proposed deal 50/50, originally offered about $60 a share, while PayPal traded near $58 a share as the hosts recorded the show. Whiteman noted the non-affected share price sits somewhere in the $40s, so the bid is still a premium to that level, but he called it too low and said he doubts a higher offer is coming.
PayPal CEO Enrique Lores told the earnings call that the board remains open to evaluating any path that could "create more value for shareholders than simply executing on their growth plans". Several reports say PayPal wants about $70 a share to seriously consider an offer, and Whiteman said many institutional investors want closer to $80 — a wide gap from the $53 billion currently on the table.
Whiteman said he expects PayPal to remain independent, describing the stock as increasingly treated like a cash-generating yield play rather than a takeover target.
Source: The Motley Fool
Trading involves risk.
Risk Disclaimer
