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PayPal Holdings Inc PYPL

Rating as of

Morningstar’s Analysis

Valuation
Currency in USD
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

PayPal’s Possible Acquisition of Pinterest Will Benefit Pinterest; Benefits for PayPal Are Uncertain

Ali Mogharabi Senior Equity Analyst

Analyst Note

| Ali Mogharabi |

According to Bloomberg, PayPal Holdings could be in talks to acquire narrow-moat Pinterest. Bloomberg’s story was followed by reports from CNBC that the two firms are in late-stage talks and the price discussed is $70 per share, which is approximately 11 times 2022 revenue and equivalent to our current Pinterest fair value estimate. Reuters later reported that the deal could be partially stock-based. While neither company has commented on the reports, our initial view is that while a possible deal is good news for Pinterest, uncertainty regarding long-term benefits for PayPal remains. Pinterest stock spiked 13% but continues to trade at a discount to our fair value estimate. In reaction to the reports, PayPal dipped 5% but remains at 1-star as it trades at a 76% premium to our $147 fair value estimate.

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Company Profile

Business Description

PayPal was spun off from eBay in 2015 and provides electronic payment solutions to merchants and consumers, with a focus on online transactions. The company had 377 million active accounts at the end of 2020, including 29 million merchant accounts. The company also owns Xoom, an international money transfer business, and Venmo, a person-to-person payment platform.

Contact
2211 North First Street
San Jose, CA, 95131
T +1 408 967-1000
Sector Financial Services
Industry Credit Services
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 26,500

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