Bernstein Ponders Potential PayPal M&A

As such, the firm maintains its Overweight rating and $66 price target for the shares of PayPal.

Analyst Lisa Ellis listed the potential acquisition targets, categorizing them as top candidates and less-likely candidates.

Top Candidates

• Adyen: $5 billion, plus, price tag; Braintree of continental Europe.
• Klarna: $2.5 billion, plus, price tag; PayPal credit++ of Scandinavia.
• Square Inc (NYSE:SQ): $10 billion, plus, price tag; merchant of record capabilities and in-store SMB presence synergistic.
• Stripe: $9 billion, plus, price tag; Braintree competitor.

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Less Likely Candidates

PayPal Unlikely To Be Acquired

• WIRECARD AG UNSPON ADR EACH REP 0.5 ORD (OTC:WCAGY): $11 billion, plus, price tag; WORLDPAY GRP PLC UNSPON ADR EACH REPR 3 ORD (OTC:WPYGY) of Germany.
• Shopify Inc (US) (NYSE:SHOP): $11 billion, plus, price tag; SMB-centric e-commerce service provider.
• Sumup: mPos provider.
• Transferwise: Xoom competitor.
• Nets: $5 billion, plus, price tag; Vocalink of Nordics.
• Synchrony: credit partner.
• Vantiv Inc (NYSE:VNTV)/Worldpay.
• Global Payments Inc (NYSE:GPN).
• First Data Corp (NYSE:FDC): processing partner.
• Discover: In-store partner.

Meanwhile, Bernstein believes PayPal is unlikely to be acquired, given that few players can afford a $75 billion, plus, price tag. Additionally, the firm believes PayPal is likely more valuable independent than owned by those that could.

The firm sees dis-synergies or unclear deal rationale if PayPal was bought by Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), Alphabet Inc (NASDAQ:GOOGL) (NASDAQ:GOOG), Facebook Inc (NASDAQ:FB), Visa Inc (NYSE:V), Mastercard Inc (NYSE:MA), JPMorgan Chase & Co. (NYSE:JPM) or Wells Fargo & Co (NYSE:WFC).

Although a merger with Alibaba Group Holding Ltd (NYSE:BABA)-owned AliPay would make sense, the firm feels the merger would likely be stymied by regulators. The firm also ruled out American Express Company (NYSE:AXP) interested in PayPal, as it would now conflict with Choice.

That said, Bernstein believes the strong performance will continue over the coming year, catalyzed by a likely strategic acquisition, the forthcoming credit partnership intended to shift the company's credit business off-balance sheet and earnings outperformance, driven by recent pricing actions and the rollout of Choice

Related Link: What Will Alibaba Do With MoneyGram? _________ Image Credit: By Sagar Savla - Own work, CC BY-SA 3.0, via Wikimedia Commons