PayPal’s Takeover Story Ended, But Its Turnaround Story Didn’t

Key Points

• PayPal shares fell after Stripe and Advent reportedly ended their takeover pursuit, shifting attention back to the company’s standalone turnaround.
• PayPal’s Q2 earnings beat, higher guidance, low earnings multiple, and large active-account base support the undervaluation argument.
• PYUSD gives PayPal another growth angle, while Affirm offers a higher-growth fintech alternative with stronger recent momentum.

It's been a tumultuous summer for PayPal Holdings Inc. NASDAQ: PYPL: shares surged in July on news that Stripe and a private equity partner, Advent International, offered to buy the payments services firm after months of speculation. A quick two weeks later, PayPal reported better-than-expected Q2 2026 earnings, throwing investors for a loop and causing some to question whether the deal might actually not go through. In mid-August, the price of PayPal shares climbed above the $60.50 price that Stripe and Advent had set in their deal; two weeks later, the deal fell through, and PayPal shares tumbled.

Ultimately, the collapse of the potential deal does not change PayPal's underlying business and appeal, with a massive number of active users, a growing stablecoin, and strong fundamentals in multiple categories. This could make the current moment a good one to consider entering a position in PayPal, regardless of whether the deal becomes a possibility again.

Is PayPal's Price Decline a Buy Opportunity or a Sign of a Takeover Premium?

Key to an investor's assessment of PayPal at this stage is the fact that the company's board rejected Stripe's offer, which totaled about $53 billion and valued the company at $60.50 per share. This would suggest that leaders assessed this price tag to be insufficient—but then shares of PYPL collapsed by about 13% immediately after the deal fell through. They have since risen marginally but are still not back up to the $60.50 benchmark.

The question then becomes whether the deal collapse is actually an opportunity to buy PayPal at a discount to the rejected price from Stripe's offer, or if the sell-off actually reveals that a takeover premium had been artificially boosting the firm's valuation more than the underlying business itself could justify.

PayPal's Q2 earnings suggest the former may be more likely. The company reported earnings per share (EPS) of $1.38, 10 cents ahead of analyst predictions, and also raised full-year EPS guidance to $5.38. This positions the stock as a profitable fintech that is actually being priced now on its standalone turnaround potential.Its price-to-earnings (P/E) ratio of 10.4 is modest for the industry. Revenue climbed by a decent 4.8% year over year (YOY).

It would appear that PayPal's sales growth—moderate for now, but improving—coupled with strong profitability and a fairly low earnings multiple, may compel investors to look more closely. Add in the fact that PayPal is one of the most recognizable brands in fintech and that it boasts a customer base of about 430 million active accounts, and the appeal may grow further.

PayPal's Stablecoin Could Be a Hidden Growth Engine

PYUSD is a stablecoin that is fully integrated into PayPal's platform. Thanks to the GENIUS Act's regulatory framework, PayPal's stablecoin has achieved notable circulation. This could be a potential driver of future revenue growth for the company as it enjoys fee-based revenue from transaction settlements, although it is a scenario often overlooked by analysts and investors focused more on PayPal's traditional services business.

Ways the Deal Could Re-Emerge...Plus an Alternative

There are multiple ways that the takeover bid for PayPal could re-emerge, potentially throwing investor calculations off once again.

First, Stripe and Advent are free to return with a higher offer. Given that this deal would likely exceed the previous $60.50 offer, it could represent fairly significant upside potential beyond what analysts already predict for shares. It's also possible that a different buyer emerges with an offer that exceeds Stripe's as well.

As PayPal initiates its latest round of layoffs in September 2026, perhaps investors will be inclined to look to alternatives like Affirm Holdings Inc. NASDAQ: AFRM.

Although it is in the same fintech space as PayPal, it has a different dynamic, including accelerating growth, expanding margins, and strong conviction from analysts.

This company also beat analyst EPS predictions for the latest quarter, and despite the fact that revenue fell a bit short, sales nonetheless climbed by an impressive 33% YOY. Further, Affirm's EPS win was fairly monumental, as the company reported EPS of $4.62 compared to analyst expectations of just 35 cents per share.

Affirm cannot rival PayPal's user base, but it does have a sizable addressable market, an aggressive diversification plan to expand its offerings, and improving margins that suggest it has been able to scale successfully and sustainably. Investors may want to ditch PayPal entirely and look to a stock that has 23 Buy or equivalent ratings from Wall Street analysts, as well as 37% in predicted upside potential.