Massive News for PayPal Stock Investors! | PYPL Stock Analysis

We got some massive news for PayPal stock investors as there was an acquisition offer from Stripe and Advent to make a $50 billion bid to acquire PayPal entirely. Now, I'm going to discuss the details of this announcement and what I'll be doing with my PayPal shares. I've owned PayPal stock for more than a year now. I think more than two years now. I've been a disappointed investor in PayPal. I'm losing money even after the big increase in today's price action and I'll let you know how I'll be approaching this takeover bid as a shareholder myself. I want to thank The Motley Fool for sponsoring this video. Visit fool.com/parKev for the 10 best stocks to buy now. So, PayPal stock was up over 17% today on the news that Stripe and Advent put together $53 billion on the table to purchase and acquire PayPal. Notably, as of today's close, PayPal's market cap is $49 billion. So, if this price is just an equity acquisition here, it's about a few billion dollar premium to where PayPal's closing price is just $4 billion above where PayPal's closing market capitalization is today. Now, I wouldn't be surprised if there is some back and forth here. If maybe there is some negotiation that gets the price higher. I also wouldn't be surprised if nothing comes of this news because remember, there's been rumors of several companies trying to acquire PayPal over the previous few years. The business has underperformed. There's been a few changes of leadership at the top. There hasn't been very much progress in the turnaround strategy to improve the business. And that's where I come in as a disappointed PayPal shareholder. I was already considering dumping PayPal stock. I've owned this stock for over a year, a couple of years now, and I haven't seen very much improvement. I haven't seen very much progress, and I haven't seen a coherent strategy from a management team that gives me confidence that they'll be able to accelerate growth and improve some of the trends that have the company losing market share. And so, I feel like I've given the company enough time to turn things around, to figure things out, and they haven't. And so, I was ready to cut ties with PayPal. I was considering selling the stock already, and today I saw the news, the share price jumping by 17% gave me that much more reason. So, if the share price holds here, I'm probably a seller of PayPal stock on the back of this news. Even though I still think the valuation is attractive, in fact, when looking at my discounted cash flow valuation model, which I just updated today, on the back of this news, I wanted to update my valuation model, the stock still looks undervalued even after the 17% rise. At $55 per share, it's well below my intrinsic value per share calculation of $81. In fact, at $55 per share compared to my intrinsic value of 81, there seems to be about $25 of upside here, roughly 40% upside remaining compared to the fair value of the stock. That's why I suggest that I wouldn't be surprised if there is some back and forth between PayPal's management team and the potential acquirers to raise the bid, to raise the offer, because it's still considerably below the fair market value in terms of the share price of this company. Of course, this could come to fruition. The management team could agree to this acquisition, and shareholders could be compensated. As a result, the share price might go up a little bit from here. If there's no negotiation, I don't see the share price going up higher. If the company is indeed acquired for acquired for the $53 billion market capitalization. Similarly, when I look at valuation on the forward price to earnings ratio, PayPal is trading at just the forward PE of 9.6, which is trading like a company that has zero growth prospects ahead. It's trading like a company that will grow at maybe the low single digits, if that, while improving the earnings per share by the low double digits, maybe revenue growth. This is pricing the company as if the revenue will grow between zero and 2% and the earnings per share will grow by between 4% and 6%. That's what it means when you have a valuation at this level, when you're in a category at this large a size with this much opportunity and you're still selling at this low of a valuation, the market prospects, the market enthusiasm for your business is very, very low. And so, I wouldn't be surprised if also there is a competing bid, someone that comes in that sees, "Oh, PayPal is up for sale. Let's make a competing offer to try and attract this company." Especially if they think it's going to go for less than 50 or less than 55 billion dollars, the valuation of the equity is much higher than that, in my opinion. So, this is something that gets things started, really good news for PayPal stock investors. I'm happy to see this. I bought my PayPal shares, I believe around 65 or 68 dollars, so I'm still down. I was down even more, so I'm happy to see the share price up and I'm I'm going to be happy to cut my losses at a smaller level and take whatever uh tomorrow or the next day the share price is and sell my PayPal shares. It's still It's a relatively small percentage of my portfolio. Uh it's probably less than 2% of my portfolio. So, it's not a big deal. That's why I might not get around to selling it tomorrow. But certainly this week if the price remains at these levels, I'm probably going to sell my shares, take my loss here in PayPal stock, and move on and and allocate that capital to another business that I think has better long-term prospects.