PayPal (NASDAQ:PYPL) Shares Gap Up - Time to Buy?

Key Points

• PayPal shares jumped sharply after reports that Stripe and Advent offered to buy the company for $60.50 per share, giving PYPL a sizable takeover premium and pushing the stock well above its prior close.
• The rumored deal would value PayPal at more than $53 billion and is said to be backed by about $50 billion in committed financing, which adds credibility to the bid, though PayPal has not publicly responded.
• Despite the takeover chatter, analyst sentiment remains mixed: the stock carries a Hold consensus rating with an average target price of $53.91, even as recent results showed earnings and revenue beating expectations.

PayPal Holdings, Inc. (NASDAQ:PYPL - Get Free Report) shares gapped up before the market opened on Wednesday . The stock had previously closed at $47.37, but opened at $54.85. PayPal shares last traded at $54.7720, with a volume of 31,831,140 shares traded.

More PayPal News

Here are the key news stories impacting PayPal this week:

• Positive Sentiment: Stripe and Advent reportedly offered to buy PayPal for $60.50 per share, creating a takeover premium that has sent PYPL sharply higher. Reuters report on Stripe and Advent offer
• Positive Sentiment: The reported deal would value PayPal at more than $53 billion and is supported by roughly $50 billion in committed financing, increasing the credibility of the bid. PYMNTS report on the bid
• Neutral Sentiment: PayPal has not publicly responded to the approach yet, so the situation remains preliminary and could still change materially. Yahoo Finance report on the offer
• Neutral Sentiment: Analyst and commentary pieces suggest the rumored offer may not fully reflect PayPal’s longer-term value, which could complicate any deal process. Seeking Alpha analysis

Analysts Set New Price Targets

A number of brokerages have recently commented on PYPL. The Goldman Sachs Group upped their price target on PayPal from $41.00 to $48.00 and gave the company a "sell" rating in a research note on Thursday, July 9th. Barclays assumed coverage on shares of PayPal in a report on Tuesday, July 7th. They set an "underweight" rating and a $42.00 price objective for the company. Mizuho reiterated a "neutral" rating and issued a $50.00 target price (down from $60.00) on shares of PayPal in a report on Thursday, April 16th. Daiwa Securities Group raised shares of PayPal from a "hold" rating to an "outperform" rating in a research report on Wednesday, May 6th. Finally, Weiss Ratings reissued a "hold (c-)" rating on shares of PayPal in a report on Friday, May 8th. Seven analysts have rated the stock with a Buy rating, thirty-two have assigned a Hold rating and six have given a Sell rating to the stock. Based on data from MarketBeat.com, the company has a consensus rating of "Hold" and an average target price of $53.91.

PayPal Price Performance

The company has a current ratio of 1.26, a quick ratio of 1.26 and a debt-to-equity ratio of 0.47. The company has a fifty day moving average price of $43.98 and a two-hundred day moving average price of $47.22. The firm has a market cap of $48.96 billion, a P/E ratio of 10.43, a PEG ratio of 1.19 and a beta of 1.33.

PayPal (NASDAQ:PYPL - Get Free Report) last posted its earnings results on Tuesday, May 5th. The credit services provider reported $1.34 earnings per share (EPS) for the quarter, topping analysts' consensus estimates of $1.27 by $0.07. PayPal had a return on equity of 25.02% and a net margin of 15.00%.The business had revenue of $8.35 billion during the quarter, compared to analysts' expectations of $8.05 billion. During the same period in the prior year, the business earned $1.33 EPS. PayPal's revenue for the quarter was up 7.2% compared to the same quarter last year. Equities analysts anticipate that PayPal Holdings, Inc. will post 5.32 earnings per share for the current year.

PayPal Dividend Announcement

The business also recently disclosed a quarterly dividend, which was paid on Thursday, June 25th. Stockholders of record on Thursday, June 4th were given a dividend of $0.14 per share. The ex-dividend date of this dividend was Thursday, June 4th. This represents a $0.56 annualized dividend and a dividend yield of 1.0%. PayPal's dividend payout ratio is currently 10.51%.

Insider Buying and Selling

In related news, insider Suzan Kereere sold 3,379 shares of the company's stock in a transaction on Wednesday, June 3rd. The shares were sold at an average price of $42.79, for a total value of $144,587.41. Following the completion of the transaction, the insider directly owned 30,983 shares of the company's stock, valued at approximately $1,325,762.57. This represents a 9.83% decrease in their position. The sale was disclosed in a document filed with the Securities & Exchange Commission, which is accessible through this link. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, insider Frank Keller sold 4,612 shares of the stock in a transaction dated Wednesday, June 3rd. The stock was sold at an average price of $42.54, for a total value of $196,194.48. Following the transaction, the insider owned 41,567 shares of the company's stock, valued at approximately $1,768,260.18. This trade represents a 9.99% decrease in their position. The disclosure for this sale is available in the SEC filing. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Insiders have sold a total of 20,612 shares of company stock worth $966,623 over the last ninety days. Company insiders own 0.63% of the company's stock.

Institutional Trading of PayPal

Institutional investors have recently modified their holdings of the company. Maia Wealth LLC increased its position in shares of PayPal by 2.5% during the third quarter. Maia Wealth LLC now owns 6,404 shares of the credit services provider's stock valued at $424,000 after acquiring an additional 155 shares during the last quarter. GeoWealth Management LLC lifted its holdings in shares of PayPal by 6.2% in the 3rd quarter. GeoWealth Management LLC now owns 3,214 shares of the credit services provider's stock worth $216,000 after acquiring an additional 188 shares during the last quarter. Harrell Investment Partners LLC lifted its holdings in shares of PayPal by 2.1% in the 4th quarter. Harrell Investment Partners LLC now owns 9,374 shares of the credit services provider's stock worth $547,000 after acquiring an additional 189 shares during the last quarter. Formidable Asset Management LLC boosted its position in shares of PayPal by 0.8% during the 1st quarter. Formidable Asset Management LLC now owns 25,937 shares of the credit services provider's stock worth $1,173,000 after purchasing an additional 205 shares during the period. Finally, KPP Advisory Services LLC boosted its position in shares of PayPal by 3.3% during the 1st quarter. KPP Advisory Services LLC now owns 6,625 shares of the credit services provider's stock worth $300,000 after purchasing an additional 214 shares during the period. 68.32% of the stock is currently owned by institutional investors.

PayPal Company Profile

PayPal Holdings, Inc operates a global digital payments platform that enables consumers and merchants to send and receive payments online, on mobile devices and at the point of sale. The company provides a broad set of payment solutions, including a digital wallet, merchant payment processing, checkout services, invoicing and fraud-management tools. PayPal's platform is designed to support e-commerce, in-person retail and person-to-person transfers, targeting both individual consumers and businesses of varying sizes.

Key products and services in PayPal's portfolio include the PayPal wallet and checkout ecosystem, the Venmo peer-to-peer mobile app, Braintree's developer-focused payment gateway, Xoom for international money transfers, and PayPal Credit and buy-now-pay-later options.

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