When rumor recently circulated that PayPal (PYPL) was about to make a ~45 billion offer to bring Pinterest under the fold, the development was not seen in a positive light by PYPL investors, who sent shares down in the subsequent session.
Last week, however, the digital payments giant poured cold water on the rumors by stating it is “not pursuing an acquisition of Pinterest at this time.” It’s a good decision, says Piper Sandler’s Christopher Donat.
“We have been skeptical of the strategic merits of the potential PINS acquisition,” the analyst said. “We view PYPL’s announcement as a clear positive, but it leaves open the possibility for PYPL to acquire PINS in the future.”
That is because of PayPal’s use of the phrase “at this time” which suggests to the analyst the company might pursue this opportunity eventually.
The subject of timing could be down to the effect of Apple’s app tracking transparency (ATT) changes, which have limited the ability of social platforms like PINS to target ads for specific consumers. “PayPal might be waiting for policy or technology changes that could reduce the negative impact to ATT on advertising spending,” Donat pontificated.
Or maybe “at this time” means something different altogether like “never say never,” with PayPal not wanting to limit future options.
PayPal CEO Dan Schulman said at the company’s February investor day that the company is looking at “potential acquisition targets that are small and some that are more transformative.” Donat believes this means the company is “on the lookout for transformative acquisitions,” with a shopping-related purchase possible due to Schulman’s interest in the “shopping component” of digital wallets.
In any case, while PayPal shares saw a bounce following its denial of the rumors, investors have since been staying away. Donat thinks the stock would benefit if PayPal was “clearer about its intentions” for PINS and the analyst expects some clarification when PayPal reports Q3 earnings on November 8.
All in all, Donat stays with the bulls, reiterating an Overweight (i.e. Buy) rating on PayPal shares, along with a $315 price target. Investors could be pocketing gains of ~37%, should Donat’s target be met over the next 12 months. (To watch Donat’s track record, click here)
So, that’s Piper Sandler’s view, what does the rest of the street make of PYPL’s prospects? Barring two fencesitters, all 14 other recent reviews are positive, culminating in the stock’s Strong Buy consensus rating. The average price target currently stands at $333, suggesting shares will rise by 43% over the one-year timeframe. (See PayPal stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
