PayPal: No Buyout Required — But Welcome at the Right Price
Yesterday Bloomberg reported renewed takeover interest in PayPal Holdings (ticker: PYPL) after the company has lost nearly half its market value over the past year — here’s the article: https://www.bloomberg.com/…/paypal-attracts-takeover….
Devotion owns PayPal.
In hindsight, we bought too early. Investors are clearly worried about growth, but our investment never required growth re-acceleration and it certainly doesn’t require a buyout (though one would be welcome at the right price).
At roughly a $40B market cap and $6B+ in projected free cash flow, the stock trades at a mid-teens free cash flow yield. The balance sheet is stronger than many realize — cash and investments exceed total debt. This isn’t a leveraged turnaround. It’s a scaled payments platform generating billions in annual owner earnings with meaningful financial flexibility.
When a business like that loses nearly half its value, it’s not surprising that interest starts to surface.
Our thesis rests on cash generation.
Devotion to Owner Earnings.
Disclosure: The author and clients of Devotion Capital own shares of PYPL.
