PayPal (NASDAQ:PYPL) stock has moved sideways in recent days as investors await the company’s response to the reported Stripe and Advent bid. The stock has stalled around the $56 level as traders remain focused on the upcoming earnings report for fresh catalysts.
PayPal Stock Eyes Response to Stripe and Advent Bid
Stripe and Advent recently made a $53 billion bid for PayPal, which they believe is undervalued and has substantial upside. Besides, the company has a forward price-to-earnings ratio of 10, lower than the S&P 500 Index’s average of 20. It is also lower than the five-year average of 18.
The bid came at a time when PayPal has been under pressure, with its stock falling from a record high of $300 to a low of $40.
PayPal has not yet responded to the offer, which makes the upcoming earnings report all the more significant. The company is likely to share more details on the offer, with reports suggesting that the board considers it undervalues the company.
There are three possible scenarios. PayPal may decide to end the deal, with the management hoping that it can engineer a turnaround. Such a move may drag the stock lower as its turnaround has taken too long.
PayPal may also push Stripe and Advent to raise their bids and wait to see how they respond. Alternatively, other companies could gatecrash the acquisition, as was seen with Paramount’s buyout of Warner Bros. Discovery.
Traders are sceptical about whether the deal will close this year. A Polymarket poll places the odds of the deal happening at 30%, down from 77.8% on July 15.
PayPal Earnings Growth Has Stalled
Analysts expect PayPal’s results to show slowing revenue and profitability growth in the second quarter. The average estimate is that revenue rose by 2.25% to $8.47 billion, while earnings per share fell from $1.40 to $1.28.
For the year, analysts expect its revenue to show that its revenue to grow by 3.50% to $34.3 billion. PayPal’s growth has stalled in the past few years as competition in its branded and unbranded businesses intensified.
PayPal is competing with companies like Stripe, Block, Google, and Apple, all of which have grown more popular in recent years. It is also contending with the rise of stablecoins, known for their speed and lower transaction costs. While PayPal launched its own stablecoin, it has yet to gain substantial market share.
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