Many analysts view PayPal Holdings’ (PYPL) possible acquisition of social media firm Pinterest (PINS) favorably, as the deal is expected to expand PayPal’s role in online shopping and advertising. But PayPal stock and PINS stock both fell on Thursday amid questions over a deal’s structure.
PINS stock dipped 1.8% to 61.57 on the stock market today after rallying nearly 13% on Wednesday. PayPal stock tumbled 4.8% to near 246 after falling nearly 5% on Wednesday when word of a possible deal surfaced. Neither company has confirmed a deal is in the works.
PayPal’s offer is said to be around $70 per share, with a deal valued at around $45 billion. It’s unclear how much equity or cash PayPal would use to finance the deal.
Pinterest ended the June quarter with 454 million monthly active users. But its user growth has slowed.
“About 80% of Pinterest’s users are outside the U.S., primarily in India/China, though 78% of its revenues are generated from the U.S.,” Bank of America analyst Jason Kupferberg said in a note to clients.
PayPal Stock: New Marketing Opportunities?
He added: “The potential Pinterest acquisition could allow PYPL to cross-sell between user bases, expand its revenue stream into advertising, and deepen customer relationships, leveraging Pinterest’s extensive data.”
Pinterest is a pinboard-style photo-sharing website. It allows users to create and manage theme-based image collections such as events, interests, and hobbies. All of its revenue comes from advertising.
“Integrating PINS’ experience-based platform into PayPal’s recently rolled out Super App and in-app shopping capabilities through Honey should significantly increase transactions per user,” PayPal stock analyst Bryan Keane from Deutsche Bank said in his report to clients.
PayPal has 403 million consumer users of its online checkout button. PayPal has told analysts it’s aiming for 750 million users by 2025. About 28 million merchants worldwide use PayPal’s payment network.
PINS Stock: More Advertising Competition
“We expect some in the market may push back on a deal motivated by active account acquisition,” PayPal stock analyst Trevor Williams from Deutsche Bank said in a note.
At Mizuho Securities, analyst Dan Dolev said in his note: “We see several potential concerns including unknown degree of user overlap, rapid deceleration in Pinterest user growth in recent quarters, and the deal potentially signaling that PayPal’s organic net new adds in the second half of 2021 may be weaker than hoped.”
PINS stock faces intensifying competition for users and advertising dollars from Facebook‘s (FB) Instagram, TikTok and Twitter (TWTR). Pinterest has partnered with e-commerce firm Shopify (SHOP) to make shopping easier on its social media platform.
PayPal reports third quarter earnings on Nov. 8.
IBD offers a broad range of growth stock lists, such as Leaderboard. Investors also can create watch lists for issues such as PayPal stock and PINS stock, find companies nearing a buy point, or develop custom screens at IBD MarketSmith.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.