PayPal's $2.2-Billion iZettle Acquisition Reassures A Sell-Side Bull

Paypal Holdings Inc PYPL's $2.2-billion acquisition of the Swedish company iZettle gave a KeyBanc Capital Markets added confidence in his bullish thesis for the payments stock. 

The Analyst

KeyBanc's Josh Beck maintains an Overweight rating on PayPal with an unchanged $90 price target.

The Thesis

PayPal's acquisition of iZettle, often referred to as the "Square of Europe," will bolster its omnichannel capabilities at a time when the "lines separating commerce increasingly blur," Beck said in a research report.

The scale offered by PayPal's 19 million merchants could accelerate a variety of initiatives at iZettle, the analyst said:

• The scaling up of its new e-commerce platform.
• A focus on new geographic regions like Australia.
• Further penetration in physical retail locations.

The overall potential for omnichannel synergies will likely more than offset the lower profitability profile associated with iZettle's business over time, Beck said. 

PayPal's acquisition will likely create "elevated competitive overlap" for rivals like Square Inc SQ and Brazil-based PagSeguro Digital Ltd PAGS, the analyst said. The total addressable market is large enough to "support multiple beneficiaries," he said. 

PayPal's acquisition emphasizes the bullish case for owning the stock, according to KeyBanc. 

Price Action

Shares of PayPal were trading higher by 1.87 percent Friday morning.

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