That was the initial reaction to the news that PayPal was considering buying Pinterest, which broke on Wednesday afternoon. It was a natural reaction, given that PayPal is a payments network that also owns Venmo and dabbles in cryptocurrency. Pinterest also allows you to create a digital vision board of your ideal dinner.
However, now that the news has settled in, some on Wall Street are beginning to recognize the deal’s merits, even if it did take 10 hours.
“Technology businesses are rapidly vying to provide entertainment, information, and commerce services to consumers. The more deeply a company can penetrate a customer’s daily activities (think Amazon providing TV programming, advertising messages, home hub interactivity, and product delivery), the more long-term economic value that relationship can potentially provide “Michael Morris, a Guggenheim Securities analyst, explained the situation. “To the extent that companies with unique functional strength and financial power see an opportunity to add a consumer touchpoint to their portfolio, we believe the current low capital cost environment and inflation concerns will drive more aggressive consolidation exploration than we’ve seen previously.”
Morris recommends Pinterest stock as a Buy.
According to many sources, PayPal is in talks to buy Pinterest for $40 billion to $45 billion in stock. According to the rumors, the timing of any deal is still undetermined. Pinterest declined to comment on the news to Yahoo Finance.
Pinterest’s stock (PINS) soared more than 13% in response to the news, while PayPal’s stock dropped 5% over concerns that the deal would dilute existing owners.
On Thursday, PayPal’s price plunged another 5%, while Pinterest’s shares lost 3%. Since the news of the agreement emerged, both stocks have been the top trending tickers on Yahoo Finance.
The possible combination, which would bring PayPal into the nascent world of social commerce, is not without its detractors on Wall Street.
According to Mizuho Securities analyst Dan Dolev, Pinterest’s user growth is slowing following a year of robust gains because of individuals staying at home during the epidemic. Meanwhile, the deal could indicate that PayPal is concerned about its own sluggish growth.
CFRA analyst Angelo Zino explained, “While Pinterest is experiencing a slowdown in membership growth as it approaches pandemic levels, we anticipate strong secular tailwinds as more ad money flow to the social network. On PayPal’s side, we believe the company is considering a potential agreement as part of an effort to further integrate e-commerce and social media in order to expand transaction growth.”
Zino downgraded his Pinterest rating to Buy from Strong Buy.