PayPal Holdings closed at $57.01 on October 30, 2026: 10.9 times its last four quarters of GAAP earnings, 10.2 times its 2026 adjusted forecast, 2.43 times book value, with a free cash flow yield of 13.3%. Three and a half months earlier, Reuters reported a cash offer of $60.50 a share from Stripe and Advent, 6% above the date-of-value price, which PayPal’s board reportedly considered too low. PayPal has not commented on the offer.
At the date of value the price was below a cash offer that PayPal’s board, according to press reports, thought undervalued the company. Bloomberg later reported that the buyers had withdrawn.This workfile does six things. It describes the business and its latest quarter (section 1). It sets out the price path with the dated event behind each large move (section 2). It records every report on the offer, with its source and what it does not establish (section 3). It separates profit from per-share profit, since the share count fell 22.5% in under three years (sections 4 and 5). It puts the valuation measures on one page (sections 6 and 7). And it lists the balance sheet, credit, management and what would change the conclusion (sections 8 to 10).
PayPal produced $6.3 billion of free cash flow in the last four quarters and was priced at about 10.9 times earnings, below the cash offer reported in July. Profit is falling while per-share figures hold up on buybacks, and the core checkout product grew 1%. The position taken here rests on the cash flow, the share count and the reported offer, and requires profit to stop shrinking.
PayPal moves money for consumers and merchants: the PayPal button at online checkouts (branded checkout), Venmo, Braintree (card processing for large merchants, which earns thin margins on large volume), buy-now-pay-later and merchant loans, and consumer wallets. In 2025 it reported revenue of $33.2 billion: about $29.8 billion (90%) from transaction fees on $1.79 trillion of payment volume, and the rest from loan interest and fees, interest on customer balances, and partnership and subscription income (2025 10-K). The United States was 57% of revenue.
The measure PayPal manages to is transaction margin dollars: revenue less transaction expense and credit losses. It was $15.47 billion in 2025, against revenue of $33.2 billion. Most of the gap is transaction expense: the fees PayPal pays card networks and banks to move the money.
| Measure, quarter to September 30, 2026 | Amount | Against a year earlier |
|---|---|---|
| Net revenues | $8,584M | +2% (+1% at constant currency) |
| Transaction margin dollars | $3,950M | +2% |
| Transaction margin dollars, excluding interest on customer balances | $3,661M | +3% |
| Total payment volume | $487.1B | +6% |
| Online branded checkout volume | not disclosed in dollars | +1% at constant currency |
| Venmo payment volume | $96.8B | +14% |
| Active accounts | 440M | Up slightly (438M a year earlier) |
| GAAP operating margin | 16.3% | 18.1% a year earlier |
| GAAP net income | $1,073M | −14% (from $1,248M) |
| Adjusted (non-GAAP) net income | $1,245M | −3% (from $1,288M) |
| GAAP diluted EPS | $1.25 | −4% (from $1.30) |
| Adjusted diluted EPS | $1.45 | +8% (from $1.34) |
| Weighted diluted shares | 858M | −10.6% (from 960M) |
| Restructuring and other charges | $178M | $1M a year earlier |
| Free cash flow | $1,431M | −17% (from $1,718M) |
| Share repurchases | $1,501M | 27.5M shares |
Source: PayPal’s third-quarter release (8-K Exhibit 99.1, October 27, 2026) and 10-Q. The quarter included a $45M release of credit reserves; credit losses were $58M against $86M a year earlier.
| Date | Close | Event | Source |
|---|---|---|---|
| July 23, 2021 | $308.53 | All-time closing high | Market data |
| January 17, 2025 | $91.81 | Closing high of the last 24 months | Market data |
| February 4, 2025 | $89.51 to $77.72 (−13.2%) | Fourth-quarter 2024 results | Release; the cause of the size of the move is not established |
| October 28, 2025 | $70.25 to $73.02 (+3.9%) | Third-quarter 2025 results; dividend started; OpenAI checkout partnership announced | 8-K; PayPal release |
| February 3, 2026 | $52.33 to $41.70 (−20.3%) | Fourth-quarter 2025 results, a 2026 forecast of flat to lower earnings, and a new CEO | 8-K (Feb 3, 2026) |
| February 12, 2026 | $39.08 | Closing low of the last 52 weeks | Market data |
| July 15, 2026 | $47.37 to $55.52 (+17.2%) | Reuters reports a $60.50 cash offer from Stripe and Advent | Reuters, via CNBC |
| August 13 to 27, 2026 | closes above $60.50; $61.47 on August 27 | WSJ reports talks on a higher price (August 14) | WSJ, read as a paraphrase |
| August 28, 2026 | $61.47 to $53.66 (−12.7%) | Bloomberg reports the buyers have dropped their pursuit | Bloomberg, via Reuters |
| October 27, 2026 | $54.99 to $56.09 (+2.0%) | Third-quarter results; 2026 adjusted forecast raised to about $5.60 | Release (8-K) |
| October 30, 2026 | $57.01 | Date of value | Market data |
At the date of value the stock was 82% below its 2021 record, 38% below its January 2025 high, 46% above its February 2026 low, 2.3% lower this year and 16.1% lower over twelve months. Visa and Mastercard closed within about 1% of their 52-week highs on the same day ($413.59 and $638.01), so the decline is specific to PayPal and not shared by the card networks.
Every statement about the offer comes from press reports citing people familiar with the matter. PayPal has filed nothing about it with the SEC and has not commented. The reports, in order:
| Date | Source | What it reported | Basis |
|---|---|---|---|
| July 15, 2026 | Reuters (republished by CNBC) | Stripe and Advent made a “$60.50 per share cash offer”, about $53 billion, about 28% above the prior close | People familiar with the matter |
| July 16, 2026 | Reuters, exclusive | PayPal’s board sees the offer as “undervaluing the company”; PayPal “has not formally responded” | People familiar with the matter |
| July 28, 2026 | PayPal, second-quarter call | “We don’t comment on market speculation or potential M&A discussion” (Lores) | Company transcript |
| August 14, 2026 | Wall Street Journal | PayPal rejected the offer as insufficient; talks on a higher price continued | Read through other outlets’ summaries; the original was not reachable |
| August 27, 2026 | Bloomberg (republished by Reuters) | The consortium “decided to abandon its pursuit”; no reason given | People familiar with the matter |
| October 27, 2026 | PayPal, third-quarter call | Asked about offers: “At this point, that alternative is to execute our plan” (Lores) | Third-party transcripts |
What the reports support. Two buyers, a payments company and a private equity firm, were reportedly prepared to pay $60.50 in cash for the whole of PayPal, about $53 billion. PayPal’s board reportedly regarded that as undervaluing the company. The board of a company is the party with the most information about its prospects; its reported view is that the business was worth more than $60.50 a share in July 2026.
What the reports do not establish. No figure for what the board thought the company was worth has been reported. The reasons the buyers withdrew have not been reported. Block, which reportedly approached PayPal with the two buyers in April, left before the offer was made. Between August 13 and August 27 the shares closed above $60.50, which suggests the market expected a higher offer; when the withdrawal was reported, the price fell 12.7% in a day. A report on October 23 of renewed talks could not be confirmed against any of the three outlets above and is not relied on here.
How this workfile uses the offer. As evidence of what a buyer group considered a fair price for all of it, at one point in time, three and a half months before the date of value. It is no floor under the price: the buyers were reported to have withdrawn.
PayPal has been profitable in every year since 2016. Earnings per share rose from $1.15 in 2016 to $5.41 in 2025. In 2026 the direction changed: GAAP net income fell 14% in the third quarter and was 13% lower over the first nine months than a year earlier, and the company’s own GAAP forecast for the year is about $5.07 a share, below 2025’s $5.41. Its adjusted forecast is about $5.60, above 2025’s adjusted $5.31; the difference is the restructuring and other items PayPal leaves out of its adjusted figures, which it expects to total about $570 million this year.
The share count is the reason per-share figures hold up while profit falls. In the third quarter, adjusted net income fell 3% and adjusted EPS rose 8%; GAAP net income fell 14% and GAAP EPS fell 4%. Weighted diluted shares were 10.6% lower than a year earlier.
| Line | February 3 | July 28 | October 27 |
|---|---|---|---|
| Non-GAAP EPS | Low-single-digit decline to slightly positive (from $5.31) | About $5.38 | About $5.60 |
| GAAP EPS | Mid-single-digit decline | Mid-single-digit decline | About $5.07 (2025: $5.41) |
| Transaction margin dollars | Slight decline | About $15.6B | About $15.7B (2025: $15.47B) |
| Adjusted free cash flow | $6B or more | At least $6B | $6.5B or more |
| Share repurchases | $6B | About $6B | $6B |
Source: PayPal’s fourth-quarter 2025, second-quarter and third-quarter 2026 releases and presentations. On the October 27 call, by the third-party transcripts read, management said it was too early to give 2027 guidance, that it plans to invest further in 2027, that it aims for 2027 adjusted EPS growth similar to 2026’s, and that 2027 guidance will come with the fourth-quarter report in February. No date for that report has been announced.
Over the last four quarters PayPal produced $6,299M of free cash flow and spent $6,054M on buybacks and $500M on dividends: $6,554M in total, 104% of free cash flow. Stock-based compensation over the same quarters was about $977M; free cash flow less that figure was $5,322M, 11.2% of the market value. The company also reports an adjusted free cash flow that adds back timing on loans it holds for sale; it guides that measure to $6.5 billion or more for 2026 and plans $6 billion of buybacks. $9.35 billion remained under the $15 billion authorization of February 2025, which has no expiry.
The dividend was first declared in October 2025 and first paid in December 2025, at $0.14 a share a quarter, and has not changed; the latest declaration, on October 27, 2026, is payable December 24. At the date of value the yield was 1.0%. The 2025 10-K added a risk factor saying there is “no assurance” buybacks or dividends will continue and that either may be suspended or terminated at any time.
| Measure | Reading | Note |
|---|---|---|
| Price to earnings, last four quarters (GAAP $5.24) | 10.9× | Graham’s ceiling is 15 |
| Price to the 2026 adjusted forecast ($5.60) | 10.2× | Company forecast, October 27, 2026 |
| Price to the 2026 GAAP forecast ($5.07) | 11.2× | Company forecast, October 27, 2026 |
| Price to book ($23.45 a share) | 2.43× | Graham’s ceiling is 1.5; the product with P/E is about 26 |
| Price to tangible book ($10.07 a share) | 5.7× | Goodwill of $11.0B is 56% of equity |
| Free cash flow yield, last four quarters | 13.3% | $6.3B on a market value of $47.4B |
| Enterprise value (market value less net cash) | $45.8B | Net cash of $1.6B, corporate only |
| Graham Number (app) | $54.48 | √(22.5 × EPS × book), 2025 annual report |
| Earnings power value, A and B (app) | $60.11 and $57.95 | Earnings with no growth, capitalized |
| Graham 1962 and 1974 formulas (app) | $235.49 and $171.84 | Use a 17.5% historical EPS growth rate |
| Average of the five (app headline) | $115.97 | The price is 51% below it |
| Average of the three no-growth methods | $57.51 | Within 1% of the price |
| Reverse DCF (app) | -2.5% | The yearly growth the price implies, forever |
| Acquirer’s multiple (app) | 8.4× | Enterprise value to operating earnings |
| Return on invested capital (app) | 22.2% | 2025 annual report |
| Reported cash offer, July 2026 | $60.50 | 6% above the price |
Reading the spread. The three methods that assume no growth sit within about $3 of the price; the two Graham formulas that apply PayPal’s past 17.5% EPS growth rate sit far above it and carry the app’s headline. The reverse DCF says the price assumes earnings shrink about 2.5% a year indefinitely. The question this workfile answers is therefore whether PayPal can hold its earnings roughly level; it does not have to grow for the price to be supported by the no-growth methods, and it would have to keep growing for the formula values to be reached. The reported offer sits between the two groups.
| Test | PayPal | Result |
|---|---|---|
| Adequate size | Market value about $47.4B | Pass |
| Current ratio of 2 or more | 1.26 (app: 1.29 on the 2025 report) | Fail |
| Long-term debt below net current assets | $9.99B against $13.32B (2025 report) | Pass |
| Positive earnings in each of the last ten years | 2016 to 2025, net income positive every year | Pass |
| Twenty years of uninterrupted dividends | First dividend declared October 2025, paid December 2025 | Fail |
| Earnings per share up a third over ten years | $1.15 (2016) to $5.41 (2025) | Pass |
| Price to earnings of 15 or less | 10.9× | Pass |
| Price to book of 1.5 or less (or P/E × P/B of 22.5 or less) | 2.43× (product about 26) | Fail |
PayPal passes five of Graham’s eight tests. The current ratio is low because PayPal holds customer balances on both sides of its balance sheet: $47.9 billion of current liabilities, most of them funds payable to customers, against $60.5 billion of current assets. The dividend test cannot be met by a company that began paying in 2025. Price to book fails because $11.0 billion of the $19.5 billion of equity is goodwill from past acquisitions.
Warning signs. None of the app’s eight warning signs is triggered on the 2025 annual report: free cash flow and net income are positive, EPS, revenue and book value per share did not decline over three years, there was no dividend cut, and debt does not exceed equity. The app reads the 2025 annual report; the 2026 quarters since then show net income falling. The Altman Z-score of 1.90 sits in the grey zone; the formula was built for industrial companies and is distorted by customer balances, so it is recorded here and not relied on.
| September 30, 2026 | Amount | Note |
|---|---|---|
| Cash, cash equivalents and short-term investments | $10.3B | Corporate, excluding customer funds |
| Long-term investments | $4.8B | Includes about $1.7B of strategic investments |
| Total debt | $13.5B | $1,083M of principal due in 2027, $1,797M in 2028 |
| Net cash, including long-term investments | $1.6B | Investment grade at S&P, Moody’s and Fitch (10-Q) |
| Equity | $19.5B | Goodwill $11.0B |
| Consumer loans, net charge-off rate | 4.6% | 4.5% a year earlier; receivables about $4.2B |
| Merchant loans, net charge-off rate | 8.3% | 7.3% a year earlier; receivables about $1.9B |
PayPal sells most of the buy-now-pay-later loans it makes to outside investors; in the first nine months of 2026 it received $23.8 billion from such sales, against $18.2 billion a year earlier (10-Q). Loans sold and still outstanding were $3.7 billion. The rising merchant charge-off rate is the credit figure to watch; the consumer rate is steady.
The CEO change. On February 3, 2026 PayPal said Alex Chriss had ceased to serve as President and CEO, effective February 2, because “the pace of change and execution was not in line with the Board’s expectations” (8-K). Enrique Lores, a PayPal director for nearly five years, board chair since July 2024 and for more than six years President and CEO of HP Inc., became CEO on March 1. The CFO and COO, Jamie Miller, served as interim CEO in between. Press reports describe a reduction of about 20% of the workforce announced around May 2026; the restructuring charges in section 4 are consistent with it.
Insiders. No open-market purchase by a PayPal director or officer was reported in the twelve months to the date of value. One Form 4 line in June 2026 carries the purchase code; its own footnote identifies it as shares withheld to pay tax on vesting stock, so it is not a purchase. Three officers sold about $5.7 million of shares in small lots between February and October 2026 (the author’s sum of Form 4 rows); the filings examined do not show whether the sales were under pre-arranged plans.
Lawsuits and inquiries. Securities class actions over PayPal’s statements about branded checkout were consolidated on May 21, 2026, with related derivative suits (10-Q). The 10-K lists civil investigative demands from the FTC (including one in August 2025 on merchant onboarding) and the CFPB, and a German competition case. New York’s financial regulator fined PayPal $2 million in January 2025 over a 2022 credential-stuffing breach (secondary reports; the order was not read). No restatement was found.
This issue followed a screen of six sectors and about 100 large companies run through the app on October 30 and 31, 2026. Considered and set aside for this issue, with the reason:
The author does not own PayPal and will not buy any until after the letter accompanying this workfile has gone out. He owns shares of VICI Properties, Lennar, Amazon, Walmart, Costco, TD, Scotiabank, Dick’s, Berkshire Hathaway and OMAB, all named in past issues.
The position taken here: at the date of value PayPal was priced at about 10.9 times earnings, with a 13% free cash flow yield, below a reported cash offer its board reportedly thought too low, and at a price the app’s no-growth methods support only if earnings hold level. That is the condition to watch.