Analyst Note| Ali Mogharabi |
According to Bloomberg, PayPal Holdings could be in talks to acquire narrow-moat Pinterest. Bloomberg’s story was followed by reports from CNBC that the two firms are in late-stage talks and the price discussed is $70 per share, which is approximately 11 times 2022 revenue and equivalent to our current Pinterest fair value estimate. Reuters later reported that the deal could be partially stock-based. While neither company has commented on the reports, our initial view is that while a possible deal is good news for Pinterest, uncertainty regarding long-term benefits for PayPal remains. Pinterest stock spiked 13% but continues to trade at a discount to our fair value estimate. In reaction to the reports, PayPal dipped 5% but remains at 1-star as it trades at a 76% premium to our $147 fair value estimate.