PayPal Says a $53 Billion Takeover Offer from Stripe Undervalues It. How to Play PYPL Stock Here.

For the first quarter, PayPal made it clear that it is taking deliberate steps to sharpen its strategy and simplify its organization. The company is trying to reinject growth into its system and improve its cost structure, so that margins expand. PayPal’s total payment volume (TPV) increased 11% year-over-year (YOY) to $463.96 billion, while its active accounts increased 1% to 439 million. 

Turning to the financials, the company’s net revenues increased 7% from the prior-year period to $8.35 billion, exceeding the $8.05 billion expected by Wall Street analysts. Its transaction margin dollars grew 3% YOY to $3.81 billion. 

The modest growth in the top line has affected PayPal’s bottom line. Its non-GAAP operating income dropped 5% YOY to $1.54 billion. However, its non-GAAP EPS was $1.34 for the quarter, up 1% YOY, surpassing the Street’s expected $1.27. For the current year, PayPal expects its non-GAAP EPS to decline in the low single digits or be slightly positive. 

Wall Street analysts are tepid about PayPal’s future earnings. They expect the company’s EPS to decline by 8.6% YOY to $1.28 for the fiscal second quarter (to be reported on July 28, before the market opens). For fiscal 2026, EPS is projected to grow marginally to $5.32, followed by an 8.3% increase to $5.76 in fiscal 2027.

What Do Analysts Think About PayPal’s Stock?

This month, analysts at Barclays upgraded PayPal from “Underweight” to “Equal Weight” and gave a $55 price target. The ratings upgrade came after media reports of a potential takeover of PayPal. While fundamentals were unchanged, analysts did not see the acquisition creating material downside for now, given speculation. 

Canaccord Genuity analysts raised PayPal’s price target from $42 to $55, while maintaining a “Hold” rating on the stock. Canaccord said PayPal’s board now seems more focused on improving operations under the new CEO than on strategic deals. It added that the core eCommerce payments business is mature, while PayPal has struggled to move into faster-growing consumer finance areas. 

Wall Street analysts are taking a cautious stance on PayPal’s stock now, with a consensus “Hold” rating overall. Of the 45 analysts rating the stock, five analysts gave a “Strong Buy” rating, two analysts suggested “Moderate Buy,” while a majority of 33 analysts are playing it safe with a “Hold” rating, one analyst suggested “Moderate Sell,” and four analysts gave a “Strong Sell” rating. The consensus price target of $50.07 represents a 10.1% downside from current levels. However, the Street-high price target of $66 implies an 18.5% upside. 

Key Takeaways

With slowing growth, a transition phase with a new CEO, and the takeover bid not yet certain, it might be wise to simply observe PayPal for now. 

On the date of publication, Anushka Dutta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com