Is PayPal Holdings a Buy After Its Latest Earnings Report?

The digital payments platform PayPal (NASDAQ:PYPL) has been in the news a lot lately, particularly after the private equity firm Advent International and the payments company Stripe made a joint $53 billion bid to acquire the company.

The bid is significant not only because of the consolidation it would represent in the payments space, but also because PayPal is considered one of the original digital payments platforms, which, during the pandemic, saw its shares hit an all-time high.

Still, media reports indicate PayPal would not sell under the proposed offer. PayPal is also in the midst of a turnaround plan that continued this morning, when the company posted second-quarter earnings.

Is the stock a buy after its latest earnings report?

Image source: Getty Images.

A much-needed strong print

Despite significant uncertainty, investors got the strong earnings print they were looking for.

PayPal delivered adjusted earnings per share of $1.38, ahead of consensus Wall Street estimates by $0.10. Revenue of $8.68 billion also topped expectations by over $200 million.

Total payment volume across the platform increased 9% year over year. Shares traded more than 4% higher, as of 11:33 a.m. ET.

Management also guided to full-year adjusted EPS of $5.38, which is better than the guidance provided in May for a low-single-digit decline to slightly positive, from 2025 adjusted EPS of $5.31.

PayPal also somewhat addressed the takeover speculation on a live conference call following the release of its earnings.

PayPal CEO Enrique Lores, who began his tenure as CEO earlier this year, said the company will not comment on “market speculation or potential M&A discussion.”

"At the same time, we remain open and objective in evaluating opportunities. If we see a path that we believe would create superior value for our shareholders at executing our current strategy, we would, of course, carefully consider it," he added

Is the stock a buy?

Interestingly, PayPal stock has not given back the gains seen after rumors of an acquisition began swirling, despite reportedly rejecting the deal.

The strong print and higher guidance come at a good time, as they could provide leverage for PayPal’s board if it wanted to further negotiate with Advent and Stripe.

William Blair analyst Andrew Jeffrey previously wrote in a research note after the acquisition rumors that the $53 billion bid was a “low-ball offer.” Furthermore, Jeffrey said he could see the acquisition bid going as high as $70 per share ($53 billion implied $60.50 per share).

As of this writing, PayPal stock currently trades at roughly a $51.5 billion market cap. So, for investors who think an acquisition is still on the table, PayPal stock could definitely have upside.

The risk is that the deal falls through entirely because PayPal stock is up 31% over the past month, with most of that appreciation occurring after the acquisition rumors.

If that happens, shareholders would be dependent on Lores’ turnaround plan, which involves cutting costs, updating tech and focusing on artificial intelligence solutions that could improve the business, and better monetizing Venmo.

Even after the run-up in shares, PayPal trades at an undemanding 11 times forward earnings.

I don’t think PayPal stock is a bad buy here because you have a chance of further appreciation from a potential acquisition or from the turnaround plan working.

PayPal has roughly 439 million active global consumers on its platform, giving it a strong base to work from.

However, investors should understand that shares may reset lower in the near-term if a deal doesn’t materialize, so it’s probably a good idea for interested investors to dollar-cost average into the stock for now.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends PayPal. The Motley Fool recommends the following options: short September 2026 $47.50 calls on PayPal. The Motley Fool has a disclosure policy.