Why PayPal Rallied Today, Even as Most Financial Stocks Plunged
Key Points
Financial media reported that PayPal is currently the target of buyout offers, both for the entire company as well as individual subsidiaries.
PayPal delivered highly disappointing earnings and forward guidance earlier this month.
The stock trades at a bargain valuation, but a buyout may be the best-case scenario.
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Shares of PayPal (NASDAQ: PYPL) rallied on Monday, up as much as 9.7% at one point, before retreating to a 6.2% gain as of 2:00 p.m. EDT.
Much of the financial sector was plunging today, so PayPal's gains stood out. Indeed, there was an idiosyncratic news story about the fallen payments giant today, as Bloomberg reported on potential takeover interest in the company. Given PayPal's recent plunge in value and the resignation of its former CEO, it's no surprise to see a bounce on buyout rumors.
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PayPal is attracting suitors, says Bloomberg
Today, Bloomberg reported that according to people familiar with the matter, one large competitor is considering buying PayPal outright, while others may be considering acquiring certain parts of the company.
Of note, PayPal owns several subsidiaries that may be up for sale, from the original and familiar branded one-click checkout for e-commerce transactions, the Venmo P2P payments platform, PayPal credit lending, the Braintree merchant acquirer and payment processor business, and others.
PayPal's stock is down a stunning 86.5% from its all-time high and another 28.7% this year, following its disastrous Q4 earnings report. In that report, PayPal missed both revenue and adjusted earnings expectations, provided weaker-than-expected guidance, and announced that former CEO Alex Chriss would step down after two-and-a-half years, as his turnaround plan failed to gain traction.
Image source: Getty Images.
PayPal investors may get a reprieve from today's levels
PayPal's stock currently trades at a highly discounted 8.2 times earnings, suggesting an extremely pessimistic outlook. While PayPal did guide for a slight decline in earnings per share for 2026, it is far from a total implosion.
Investors may therefore get a reprieve on a sale of the entire business, or specific assets. Still, hopes for a turnaround and significant share gains without a sale seem very far off, and unlikely to happen anytime soon, if at all.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends PayPal. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short March 2026 $65 calls on PayPal. The Motley Fool has a disclosure policy.
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