Weekly Issue #12
PayPal (PYPL) — $57.01 at Friday’s close
In July, Reuters reported that Stripe and the private equity firm Advent had offered $60.50 a share in cash for all of PayPal, about $53 billion. A day later it reported that PayPal’s board saw the offer as undervaluing the company, and the Wall Street Journal later reported that PayPal had rejected it as insufficient. The buyers walked away at the end of August, Bloomberg reported. On Friday PayPal closed at $57.01, about 6% below the price its board reportedly turned down. PayPal has not confirmed any of it.
PayPal handled $487 billion of payments last quarter, up 6%, for 440 million active accounts. Besides the PayPal button it owns Venmo and Braintree, which processes card payments for large online merchants. It has made a profit in every one of the last ten years, and earned $5.41 a share in 2025.
It also throws off cash. Over the last four quarters it produced $6.3 billion of free cash flow, about 13% of what the whole company is worth at Friday’s price, and spent about $6 billion buying back its own shares. It had 1,072 million shares at the end of 2023 and 830.7 million on October 21, so each remaining share owns a bigger piece of the business. At Friday’s close PayPal cost 10.9 times its last four quarters of earnings ($5.24 a share), and 10.2 times the $5.60 a share of adjusted earnings it now expects for 2026.
The reported offer: $60.50 a share. Friday’s close: $57.01.
Why it fell
The stock is 82% below its record close of $308.53 in July 2021 and down 2% this year. The worry is the PayPal button itself. Payment volume through its branded checkout grew 1% last quarter, the fourth quarter in a row at 1% or 2%, as rival wallets such as Apple Pay compete for the same checkout, and total revenue grew 2%.
On February 3 the board replaced its CEO, saying the pace of change and execution had not met its expectations, and gave a 2026 forecast of flat to lower earnings. The stock fell 20% that day and bottomed at $39.08 on February 12. Enrique Lores, the former head of HP, who had chaired PayPal’s board since 2024, took over on March 1. The company has since raised its 2026 adjusted forecast twice, in July and again on October 27, to about $5.60 a share.
What the reported no tells you
A board that turns down cash above the market price is saying it thinks the business is worth more than the offer. The people who know PayPal’s numbers best looked at $60.50 and, according to the reports, judged it too low. That signal is the reason I picked PayPal this week.
It comes with cautions. The board’s view comes from press reports, and PayPal has not confirmed it. Boards often turn down a first offer to get a better one. And the buyers walked away; no reason has been reported. When the offer came out in July the stock was $47.37. For two weeks in August it closed above the offer, as high as $61.47 on August 27, as if the market expected a better bid. When reports said the buyers had left, it fell 12.7% in a day. Answering an analyst’s question about the offers on the October 27 call, Lores said: “At this point, that alternative is to execute our plan.”
PayPal (PYPL) — $57.01 at the Oct 30 close, down 2% this year
| The check | Reading | Verdict |
|---|---|---|
| Price to earnings | 10.9× | ✓ Last four quarters; Ben Graham’s limit is 15. On the 2026 adjusted forecast of $5.60, 10.2× |
| Price to book | 2.4× | ⚠ Above Graham’s 1.5; price to earnings times price to book is about 26, over his 22.5 |
| Free cash flow yield | 13% | ✓ $6.3 billion over the last four quarters; about 11% after stock-based pay |
| Shares outstanding | −22.5% | ✓ Since December 2023; $9.35 billion of buyback authority left |
| Cash and investments | $15.1B | ✓ Against $13.5 billion of debt; includes $4.8 billion of long-term investments |
| Revenue growth | +2% | ⚠ Third quarter; branded checkout payment volume +1% |
| Net income | −14% | ⚠ Third quarter, after $178 million of restructuring; per share −4% on fewer shares |
| Dividend | 1.0% | ✓ $0.56 a share a year, first paid in December 2025 |
Price ratios at the Oct 30 close, on GAAP earnings of $5.24 a share over the last four quarters and the September 30 balance sheet. The PayPal page on Travis Valuation → puts the average of the five value formulas it runs at $115.97; the three that assume no growth average $57.51, about the price itself. That page reads the 2025 annual report.
The catch
Profit is shrinking under the buybacks. Net income fell 14% last quarter to $1.07 billion, partly on $178 million of restructuring charges, while earnings per share fell only 4% because there were fewer shares. PayPal’s own GAAP forecast for 2026 is about $5.07 a share, below the $5.41 of 2025; at Friday’s price that is 11.2 times. Its annual report says the buybacks and the dividend can be suspended at any time. For the case here to work, PayPal’s profit has to stop shrinking.
What I can’t know
Whether a buyer comes back. I have found no confirmed report of new talks since the end of August, and PayPal does not comment on takeover talk.
What 2027 looks like. Management said on the October 27 call that it is too early to guide and that it plans to invest further next year. Guidance comes with the fourth-quarter report in February; no date has been set.
Where credit goes. Losses on PayPal’s loans to merchants ran at 8.3% a year in the third quarter, up from 7.3%; on its consumer loans, 4.6%, against 4.5%. Shareholder class actions over what PayPal said about branded checkout were combined into one case in May.
Skin in the game
I do not own PayPal, and I will not buy any until after this letter has gone out. No PayPal insider has bought shares on the open market in the past twelve months; three executives sold about $5.7 million in small lots.
Buffett, in his 2008 letter to Berkshire shareholders, passed on a lesson from Ben Graham: “Price is what you pay; value is what you get.” The reported offer was one buyer group’s estimate of what PayPal is worth. Friday’s close is what the market will pay.
Which account?
PayPal pays $0.14 a share a quarter, $0.56 a year, about a 1.0% yield. US withholding is 15% under the Canada-US treaty, about 8 cents a share a year, if your broker has the usual form on file. It does not apply inside an RRSP. In a non-registered account you can claim it back as a foreign tax credit. In a TFSA it is lost, though at a 1% yield that costs little. With a stock like this, the price matters more than the dividend: a gain is tax-free in a TFSA, deferred in an RRSP, and half taxable in a non-registered account. General information, not tax advice.
The workfile
Everything above is the short version. The workfile has every report on the offer with its source, the price path date by date, ten years of earnings, the share count and where the cash goes, each valuation method on one page, the loans and the debt, and what I checked and could not confirm. It’s in this week’s workfile →
Your turn 👇
Which stock should we run through the checks next? Hit reply with a ticker.
Send me your pick →Curtis Travis, B.Comm, AACI (retired), is the founder of Travis Valuation. He does not own PayPal, the subject of this issue. He owns shares of VICI Properties, Lennar, Amazon, Walmart, Costco, TD, Scotiabank, Dick’s, Berkshire Hathaway and OMAB, all named in past issues. Prices, ratios, earnings, cash flow and debt are as of the Oct 30, 2026 close or the latest filing, from market data and PayPal’s own SEC filings; the two valuation averages are from the PayPal page on Travis Valuation. The offer, the board’s view of it and the buyers’ withdrawal are from Reuters reports and from Wall Street Journal and Bloomberg reports as summarized by other outlets; PayPal has not confirmed them. Prices move. Informational only — not a recommendation, and not tax advice. Do your own diligence.