This week, the board of a major payments company rejected a $60.50 per share takeover bid from Stripe and Advent International as inadequate; the stock is trading at $55.78 with Q2 earnings seven days away, the analyst consensus target is $52.42, and at least one firm argues the real value is closer to $70.
Get the take on whether the rejected deal, the upcoming earnings, and the turnaround underway under CEO Alex Chriss add up to a position worth taking now.
High-Rated AI (Sponsored)
Louis Navellier’s proprietary Stock Grader system helped flag major winners years before they became household names.
Now, that same $9 million system is flashing its highest rating on one AI stock with 28% year-over-year sales growth and more than 30,000 patents.
He is giving away the name, ticker, and full analysis for free.
A $60.50 Offer Just Got Rejected as Too Cheap, and That Changes Everything
PayPal Holdings, Inc. (NASDAQ: PYPL) is trading at $55.78, seven days before Q2 earnings on July 28. On July 15, Stripe and Advent International jointly offered $60.50 per share, valuing the company at approximately $53 billion.
The board reviewed it, called it inadequate, and said no. The stock surged 17% on the news and has given some back since.
Think about what a board rejecting $60.50 actually means. The people with the most information about the pipeline, the internal projections, and the strategic discussions decided that number does not reflect what the company is worth.
Boards do not reject takeover premiums to feel good about themselves.
They do it because they believe a better number is coming, or because the standalone business is worth more than the offer implies. Either way, you can buy today below a price the board already said was too low.
Board rejected $60.50 per share on July 17: Called it inadequate and undervaluing the company.
Current price $55.78, below the rejected bid: You are buying below a price the board already said was cheap.
Stripe and Advent bid $53 billion total: A serious offer from the largest private fintech and a major PE firm.
Stock surged 17% on deal news: The market immediately agreed the valuation gap was real.
Q2 earnings July 28, seven days away: An operational data point landing in the middle of an active deal situation.
The honest complication: the average analyst price target is $52.42, below the current $55.78. Analysts as a group are not bullish on the standalone story. The bull case is M&A optionality, not consensus upgrades.
Action: Buy a half position at $55 to $57. You are buying at a price below the rejected bid. Size it as a speculative M&A trade, not a conviction hold.
If no deal materializes, the standalone valuation without the deal premium likely pulls the stock toward $52.
RMD alert (Sponsored)
Required minimum distributions can have a significant impact on your retirement strategy if you're not prepared.
That's why many retirees are reviewing six key strategies that may help manage distributions and reduce their overall tax burden.
See the list and learn how a financial advisor may help you navigate the rules.
The Turnaround Under Alex Chriss Is Real Even If Nobody Was Pricing It In
The market spent two years writing this company off as the MySpace of digital payments. CEO Alex Chriss, who took over in late 2023, inherited a business stuffed with unprofitable volume and a consumer platform with 60 million active users that monetized at a fraction of what it should.
His plan was unglamorous: stop chasing volume, price for margin, and make the consumer side earn its keep.
It has been working. Trailing EPS is $5.34, up nearly 20% year over year. Net income is $5.06 billion, up 11%. The forward PE is 10.49, among the cheapest in the payments sector, against a peer group trading at roughly 24 times earnings.
Stripe and Advent did not bid $53 billion because the business was dying. They bid because they saw a gap between market price and actual business value.
Trailing EPS $5.34, up roughly 20% year over year: The earnings engine kept running while the stock kept falling.
Net income $5.06 billion, up 11%: Not a turnaround promise. Already delivered.
Forward PE 10.49 vs peer group roughly 24x: The cheapest major payments name by a significant margin.
Braintree renegotiations driving better take rates: Low-margin volume replaced by better economics.
Action: On the July 28 call, watch transaction margin dollars specifically. Management has explicitly named this as the metric to track. Two more clean quarters and the multiple starts moving on its own, with or without a deal.
Market Signal (Sponsored)
No one believed Whitney Tilson when he predicted the collapse of Bear Stearns and Lehman Brothers.
Or when he went on 60 Minutes exposing a company poisoning its own customers. (The stock fell nearly 80%.)
Now he has a new warning about what's REALLY around the corner for America's most beloved tech companies.
Watch for free here.
The Deal Math: What Rejecting $60.50 Says About Real Value
One firm’s sum-of-the-parts analysis puts fair value closer to $70 per share. Morgan Stanley said on record that a sale represents the most credible path to value realization for shareholders.
Barclays upgraded from Underweight to Equal Weight following the news. BofA suspended its rating because M&A situations break normal valuation models.
If a deal closes at $60.50 or above, shareholders buying at $55.78 today make 8% to 25% depending on the final price. If the deal falls apart, the standalone stock has a consensus target of $52.42 below the current price.
The board rejecting $60.50 is either smart because a higher offer is coming, or it creates a drift back toward the low $50s if nothing materializes.
Sum-of-the-parts analysis implies approximately $70 per share: Highest credible independent estimate.
Morgan Stanley: sale is the most credible path to value realization: Not hedging. Explicitly endorsing the deal case.
Analyst consensus target $52.42, below current price: The standalone story alone does not fully support $55.
Any deal above $60.50 is incremental upside from here: The rejected bid set the floor.
Action: Set alerts at $60.50 and $65. A confirmed deal above $60.50 is a take-profit signal. Above $65 means the board was right. No announcement by October means reassess.
Venmo Has 60 Million Users Who Are Barely Monetized
Venmo has approximately 60 million active users. Most monetize at a fraction of what a branded PayPal user generates. That gap is the single largest untapped lever in the business, and it requires no new customer acquisition to capture.
The customers already exist. The question is whether management can convert behavioral habit into revenue without annoying people who chose the app specifically because it felt simple and free.
Management has been pushing the debit card, rolling out merchant checkout integrations, and expanding Pay with Venmo across major retailers.
Early attach rates have been encouraging per management commentary. Even modest revenue per user improvement across 60 million accounts compounds fast.
60 million active Venmo users, very low ARPU relative to branded PayPal: The monetization gap is the structural opportunity.
Pay with Venmo expanding at major retail checkout: Converting peer-to-peer habit into commercial spending.
Venmo debit card adoption growing: High-margin product on top of an already-engaged user base.
Action: On July 28, if management provides Venmo ARPU or active checkout user numbers, compare them to prior quarters.
Acceleration in either signals the monetization thesis is working independently of any deal outcome.
Why a $53 Billion Bid Confirms the Valuation Gap Was Real
The stock is down roughly 34% over the past year and has fallen roughly 84% over five years from peak levels. The market has been pricing in competitive erosion from Apple Pay, embedded bank wallets, and Stripe in merchant infrastructure.
That is why a company generating over $5 in EPS still traded at 10x earnings. The market decided the assets were in structural decline.
The Stripe and Advent bid is the market getting corrected. Two sophisticated institutions modeled this business, concluded the sum of the parts is worth $60.50 or more, and put real money behind that conclusion.
Stripe specifically benefits from owning the consumer relationships, the Venmo network, and the merchant checkout distribution that took 20 years to build. That is not a fishing expedition. That is a strategic move by a firm that knows payments.
Stock down 84% over five years before the deal news: The market priced in a tremendous amount of bad news already.
Forward PE 10.49 vs broader diversified financial industry at roughly 15.5x: Cheaper than the whole sector.
The rejected bid is external validation that the market underpriced the business: Stripe does not bid $53 billion by accident.
Action: Watch the stock’s reaction to the Q2 print. If it falls on a clean beat, the market is treating this as a deal stock only, and earnings do not matter yet.
If it rises on a beat, the operational story is earning independent credit.
Poll: Which type of catalyst most reliably unlocks value in a cheap stock?
The Risks Are All Live Right Now
The deal falls apart. This is the primary risk. The board cited regulatory and financing hurdles alongside the inadequate price. If those hurdles are real and not just negotiating language, no deal closes. The standalone stock drifts toward the $52 analyst consensus.
Q2 disappoints on July 28. Consumer spending on discretionary categories, where branded checkout is heavily exposed, has been uneven.
A negative surprise on transaction volume or take rate undermines the board’s case that the company is worth more than $60.50 at the worst possible time.
Competition keeps grinding. Apple Pay’s position in mobile checkout and bank-embedded wallets continues to pressure the branded business. Management says share loss has stabilized. Q2 data will confirm or contradict that.
No deal materializes after the rejection: Stock gravitates toward the $52 analyst consensus without M&A premium.
Q2 operational miss: Weakens the board’s argument that the company is worth more than $60.50.
Continued share erosion in branded checkout: The structural headwind that created the discount in the first place.
Action: Hard stop at $48. If PYPL breaks below $48 on a Q2 miss with no deal update, both the operational and M&A stories have weakened at once. Exit at $48.
Final Word: A Board That Said No to $60 Billion and Meant It
The board looked at $60.50 and said the company is worth more. The stock is at $55.78 today, seven days before Q2 earnings. One firm says $70 is the real number. The turnaround is producing real EPS growth. Venmo has 60 million users who are barely monetized.
This is a deal situation with an earnings catalyst on top. Buy as a half position. Hard stop $48. Target $65 to $70 if the deal resolves above the rejected offer or the Q2 print forces the market to revisit what the standalone business is actually worth.
Setup Scorecard
Entry Window: $54 to $58. Below the rejected bid of $60.50, above the standalone analyst consensus of $52.42.
Catalyst Watch: Q2 earnings July 28, any deal update or counteroffer above $60.50, transaction margin dollar trend, Venmo monetization metrics.
Upside Setup: Deal closes above $60.50 or standalone turnaround forces multiple re-rate toward peer group. Target $65 to $70.
Downside Cushion: Rejected bid creates a price floor, 10.49x forward PE, EPS growing roughly 20% year over year, Venmo monetization upside not yet in any model.
What Moves It Next: July 28 Q2 results and transaction margin dollars, any deal announcement above $60.50, Venmo active checkout users, consumer spending data in Q2 transaction volume.
That's our coverage for today; thanks for reading! Reply to this email with feedback or any value names you want me to check out.
Best Regards,
—Noah Zelvis
Undervalued Edge
