PayPal Holdings Inc (NASDAQ:PYPL) went to market...and made another merchant-related acquisition. That's right, within weeks of acquiring iZettle, the European-based payment processing company that caters to small merchants, PayPal made another acquisition that augments the overall package it can offer merchants looking for its services. This time, the company acquired Jetlore, an AI-powered platform for retailers. Jetlore takes billions of customer data points, analyzes them, and creates actionable data that businesses can take for each individual customer. 

In the press release announcing the acquisition, Harshal Deo, PayPal's Vice President of Commerce Solutions stated:

With Jetlore's talent and AI-powered technology, we will enhance and accelerate PayPal Marketing Solutions, adding new capabilities that continue to expand PayPal's value proposition for merchants beyond the online checkout experience.

Jetlore already boasts some pretty impressive customers, including eBay, Nordstrom Rack, and Uniqlo, a popular Japanese lifestyle-brand apparel retailer. The deal was for an undisclosed amount.

Front of PayPal corporate headquarters.

PayPal has made two key acquisitions in the past month, iZettle and Jetlore, to help augment its payment processing services. Image source: PayPal Holdings Inc.

PayPal's second major merchant-based acquisition in weeks

What's truly notable about the deal is that it came just two weeks after PayPal announced its $2.2 billion acquisition to acquire iZettle, "the Square of Europe." iZettle represents the largest acquisition in PayPal's history, and at first glance, it appears PayPal paid a pretty penny for the company. iZettle is expected to facilitate about $6 billion in payment volume and generate approximately $165 million in revenue this year. As a stand-alone company, it was expected to be profitable by 2020, which amounts to PayPal acquiring iZettle for a valuation of a price-to-sales ratio in the low teens -- that's high! 

However, the deal should not be viewed solely through a valuation lens, because it looks even more compelling from a strategic rationale. For starters, the agreement gave PayPal a payment processing presence in 12 different countries where it previously had no such presence, including Brazil, Mexico, and several European markets. The deal also allows PayPal to approach merchants with what management believes is a best-in-class omnichannel solution and, importantly, enables the company to cross-sell iZettle to existing PayPal merchants and PayPal to existing iZettle merchants.

PayPal's renewed focus on merchants

The deals seem to mark an inflection point as PayPal begins to make a much bigger push toward acquiring merchants for its payment processing solutions business. While this practice has always been a part of PayPal's overall business, it was never seen as management's top priority, which was rightly focused on growing PayPal's core platform. That seems to be starting to change.

During his presentation at PayPal's recent Investor Day, transcribed by S&P Global Market Intelligence, CEO Dan Schulman said:

On the merchant side, it is all about providing an end-to-end, one-stop shop solution for digital commerce ... [I]ncreasingly, retailers are turning to PayPal as a must-have platform in order to compete with the likes of Amazon ... And what we have now is a full platform, a full commerce solution for them to write their application on top of our platform, connect into our platform, and then we provide all of these different services underneath. Whether it'd be a full omnichannel solution, that's part of the reason why we bought iZettle. Whether it'd be marketing solutions, we are increasingly not just being a checkout solution but moving up the funnel, in the middle of the funnel to turn prospects into buyers and to help merchants identify high value prospects and then how to convert them into buyers. And so we are more and more becoming a solutions company, a platform company than a button company.

PayPal's many advantages

One of the things Motley Fool co-founder David Gardner stresses when looking for good investments is optionality: Does the company have many possible futures that will allow it to evolve? What makes PayPal's positioning unique in the payment processing industry is how it might be able to leverage its 237 million-strong active user base to capture these merchants' business. While much is made of Square's (NYSE:SQ) Cash App popularity -- and rightly so! -- its 7 million user base represents just a tiny fraction of PayPal's immense scale. At least Square has Cash App, though; other payment processing companies, such as Worldpay and Global Payments, have nothing that even comes close to PayPal's digital offerings.

It would be awfully hard for retailers to turn down a pitch for PayPal's payment processing solutions that include world-class digital payments offerings, competent point-of-sale (POS) services, and, oh yeah, almost a quarter of a billion potential customers that can be directed to the business. In the past, PayPal has already discussed a future that includes ad placements on its popular Venmo platform, an especially enticing feature because customers would be able to pay without ever leaving the platform. PayPal's ability to control both sides of the purchase -- the consumer's and the merchant's -- gives it an exceptional advantage over other competitors in this space.

In PayPal's first quarter, revenue grew 24% to $3.69 billion, and adjusted earnings per share (EPS) increased 29% to $0.57. While the company's adjusted P/E ratio clocks in at over 40, I'm not sure that's all that expensive given the company's invigorated focus on acquiring merchant customers along with its massive active user base. As a shareholder, I continue to be excited about this company's future, and though PayPal is already a fairly sizable position for me, I am considering adding to it.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Matthew Cochrane owns shares of Amazon, Global Payments, PayPal Holdings, and Square. The Motley Fool owns shares of and recommends Amazon, PayPal Holdings, and Square. The Motley Fool recommends eBay and Nordstrom. The Motley Fool has a disclosure policy.