Travis Valuation · Workfile No. 12

PayPal, and the offer its board reportedly turned down

What PayPal earns, where its cash goes, what the reports on the $60.50 offer say and do not say, and what the price assumes.
SubjectNASDAQ: PYPL
Date of valueOctober 30, 2026
Price$57.01
Prepared byCurtis Travis, B.Comm, AACI (retired)

Summary of findings

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 Bloomberg later reported that the buyers had withdrawn.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).

The one-line conclusion

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.

1 · What PayPal is

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.

The third quarter of 2026

Measure, quarter to September 30, 2026AmountAgainst 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 volumenot disclosed in dollars+1% at constant currency
Venmo payment volume$96.8B+14%
Active accounts440MUp slightly (438M a year earlier)
GAAP operating margin16.3%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 shares858M−10.6% (from 960M)
Restructuring and other charges$178M$1M a year earlier
Free cash flow$1,431M−17% (from $1,718M)
Share repurchases$1,501M27.5M 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.

2 · What happened to the price

$40$55$70$85Reported offer $60.50Oct 24Apr 25Oct 25Apr 26Oct 26High $91.81Low $39.08$57.01
Figure 1. PayPal month-end closing prices, October 2024 to October 30, 2026, with the 24-month closing high, the 52-week closing low and the reported offer of $60.50. Market data.
DateCloseEventSource
July 23, 2021$308.53All-time closing highMarket data
January 17, 2025$91.81Closing high of the last 24 monthsMarket data
February 4, 2025$89.51 to $77.72 (−13.2%)Fourth-quarter 2024 resultsRelease; 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 announced8-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 CEO8-K (Feb 3, 2026)
February 12, 2026$39.08Closing low of the last 52 weeksMarket data
July 15, 2026$47.37 to $55.52 (+17.2%)Reuters reports a $60.50 cash offer from Stripe and AdventReuters, via CNBC
August 13 to 27, 2026closes above $60.50; $61.47 on August 27WSJ 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 pursuitBloomberg, via Reuters
October 27, 2026$54.99 to $56.09 (+2.0%)Third-quarter results; 2026 adjusted forecast raised to about $5.60Release (8-K)
October 30, 2026$57.01Date of valueMarket 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.

3 · The offer

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:

DateSourceWhat it reportedBasis
July 15, 2026Reuters (republished by CNBC)Stripe and Advent made a “$60.50 per share cash offer”, about $53 billion, about 28% above the prior closePeople familiar with the matter
July 16, 2026Reuters, exclusivePayPal’s board sees the offer as “undervaluing the company”; PayPal “has not formally responded”People familiar with the matter
July 28, 2026PayPal, second-quarter call“We don’t comment on market speculation or potential M&A discussion” (Lores)Company transcript
August 14, 2026Wall Street JournalPayPal rejected the offer as insufficient; talks on a higher price continuedRead through other outlets’ summaries; the original was not reachable
August 27, 2026Bloomberg (republished by Reuters)The consortium “decided to abandon its pursuit”; no reason givenPeople familiar with the matter
October 27, 2026PayPal, third-quarter callAsked 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.

4 · Earnings and the share count

$2$4$61.15161.47171.71182.07193.54203.52212.09223.84233.99245.4125
Figure 2. GAAP diluted earnings per share, 2016 to 2025. 2022 (orange) was the low of the last six years. Source: PayPal’s 10-Ks, as read from its SEC filings.

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.

400M800M1,072MDec 2023993MDec 2024920MDec 2025831MOct 2026
Figure 3. Shares outstanding at December 31, 2023, 2024 and 2025 (10-Ks) and at October 21, 2026 (10-Q cover). Down 22.5% in under three years.

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.

The 2026 forecast as it changed

LineFebruary 3July 28October 27
Non-GAAP EPSLow-single-digit decline to slightly positive (from $5.31)About $5.38About $5.60
GAAP EPSMid-single-digit declineMid-single-digit declineAbout $5.07 (2025: $5.41)
Transaction margin dollarsSlight declineAbout $15.6BAbout $15.7B (2025: $15.47B)
Adjusted free cash flow$6B or moreAt least $6B$6.5B or more
Share repurchases$6BAbout $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.

5 · Cash flow and where it goes

$0.8B$1.6B$2.4BQ4 '25Q1 '26Q2 '26Q3 '26Free cash flowBuybacks plus dividends
Figure 4. Free cash flow (operating cash flow less capital spending) against share repurchases plus dividends, by quarter, Q4 2025 to Q3 2026. Market-data statements; Q3 2026 checked against the release.

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.

6 · Every valuation tool on one page

Graham 1962$235.49Graham 1974$171.84App average$115.97Reported offer$60.50EPV-A$60.11EPV-B$57.95Price$57.01Graham Number$54.48
Figure 5. Each method against the date-of-value price and the reported offer. Grey bars are methods that apply a growth rate. The app reads the 2025 annual report (filed February 3, 2026).
MeasureReadingNote
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 quarters13.3%$6.3B on a market value of $47.4B
Enterprise value (market value less net cash)$45.8BNet 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 $57.95Earnings with no growth, capitalized
Graham 1962 and 1974 formulas (app)$235.49 and $171.84Use a 17.5% historical EPS growth rate
Average of the five (app headline)$115.97The price is 51% below it
Average of the three no-growth methods$57.51Within 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$60.506% 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.

7 · Graham’s tests and the warning signs

TestPayPalResult
Adequate sizeMarket value about $47.4BPass
Current ratio of 2 or more1.26 (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 years2016 to 2025, net income positive every yearPass
Twenty years of uninterrupted dividendsFirst dividend declared October 2025, paid December 2025Fail
Earnings per share up a third over ten years$1.15 (2016) to $5.41 (2025)Pass
Price to earnings of 15 or less10.9×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.

8 · The balance sheet and credit

September 30, 2026AmountNote
Cash, cash equivalents and short-term investments$10.3BCorporate, excluding customer funds
Long-term investments$4.8BIncludes 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$1.6BInvestment grade at S&P, Moody’s and Fitch (10-Q)
Equity$19.5BGoodwill $11.0B
Consumer loans, net charge-off rate4.6%4.5% a year earlier; receivables about $4.2B
Merchant loans, net charge-off rate8.3%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.

9 · Management, insiders and the lawsuits

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.

10 · What would make us wrong

11 · Considered and rejected

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:

12 · Position and disclosure

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.