Who Pays for PayPal?
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Who are the potential buyers for PayPal?
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Welcome to Motley Fool Money. I'm Travis Hoyum, joined today by Rachel Warren and Lou Whiteman. Guys, the big talk of the market this week is PayPal, which has been in this strange zone of value stock. Can't seem to get its shares going anywhere. They have changed CEOs. But now there's talk that they may be acquired by someone, may put themselves on the block. Lou, Does this make sense for somebody else to buy them?
What factors contribute to PayPal's current valuation?
And who possibly could actually pull off a deal and not kind of destroy their own business in the process?
First thing we need to make clear is PayPal is not a distressed asset, period. The business is healthy. The business is fine. The issue is it's a low growth business. Shares are off 84% from their all-time highs. Some of that was kind of COVID-19. hysterica. The company is profitable. Cash generation is strong.
How is PayPal's business performance assessed?
Share count is down 20% plus over the last five years. That is not a distressed asset. When I first saw these reports, my thought was private equity. I mean, everything I just said, this is an ideal scenario to take a company private, use those cash flows to pay down the debt, and also kind of get out of this quarter to quarter spotlight of when will you grow, which I think would help this business. We'll see what's going on here. One thing I think, though, is that PayPal is not on the block. So, they haven't put themselves up for sale? I don't believe that. I think that the market, that opportunistic potential acquirers are looking at that drop and realizing everything I said is true, that this is not a distressed asset and maybe we can do a deal here.
We can talk in a second about rumored buyers, potential buyers. To me, someone like Silver Lake Partners makes a ton of sense on the private equity side. Even there was talk of Addian. the European payments company, which, you know, kind of create a, just kind of give them everything they need in the U.S. and build on their strengths elsewhere. I think that if PayPal did go on the block, there'd be a lot of at least people wanting to look at it, but we'll see where this goes.
Rachel, what are you thinking when you hear a company like PayPal? It has been in value territory. One of the options is to just keep buying back shares. They can buy somewhere between 10% and 15% of shares outstanding pretty easily each year. But does a sale maybe make more sense?
What does Axon's recent earnings report reveal?
I think it's possible. And I agree with Lou. This is not a distressed business. I do think there's an argument to be made. This is a really undervalued business as it's trading right now. Shares are down about 40% over the last 12 months, about 80% to 85% from their 2021 peak. And you look at how the company's market cap has fallen to about $43 billion. It does make a full takeover more feasible for potential mega cap suitors. I mean, you have to think about the really strategically valuable assets that PayPal could bring to the table if they were acquired.
How is Axon transitioning from hardware to software?
I mean, you've got Venmo, right? They're widely recognized as the most pristine asset for PayPal with high growth, about 20% annually. There's a lot of popularity among younger demographics. PayPal operates one of only four globally recognized payment networks. You know, they process nearly $2 trillion in annual transaction volume. You've got the Braintree business, right? That's the unbranded processing business for large corporate clients that could be really attractive to a potential buyer. And even the incoming CEO, Enrique Lores, he has a history of breaking up complex businesses. I mean, there's been some speculation that maybe he was even brought in to lead a sale or or major structural overhaul.
So I do think this talk makes sense. I mean, we're going to have to see if it's more than just rumors, but it is something that I think is intriguing and perhaps makes more sense for the business than say four or five years ago.
Lou, Stripe was one of the names that has come up this week. They're still private, but there's a lot of hype behind Stripe.
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Chapters
8 chapters
1
Who are the potential buyers for PayPal?
0:05–0:46
2
What factors contribute to PayPal's current valuation?
0:46–1:12
3
How is PayPal's business performance assessed?
1:12–2:37
4
What does Axon's recent earnings report reveal?
2:37–3:09
5
How is Axon transitioning from hardware to software?
3:09–4:34
6
What insights can we gain from Cava's quarterly performance?
4:34–5:01
7
What challenges is Cava facing in the current market?
5:01–6:13
8
What future growth opportunities exist for Cava?
6:13–18:32