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Is Now a Good Time to Buy PayPal Stock?

By Rachel Warren, Jason Hall, and Toby Bordelon – Nov 2, 2021 at 7:00AM

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The company was in talks to acquire the social sharing platform Pinterest.

PayPal (PYPL -2.68%) recently confirmed that it would not be acquiring Pinterest (PINS -3.07%) after headlines were buzzing that the fintech giant might acquire the social media stock. While short-lived, the news caught investors' attention, and generated plenty of discussion about the potential benefits and drawbacks if the deal were to go through.

Shares of PayPal also retracted considerably when the news of the potential acquisition first broke. In this segment of Backstage Pass, recorded on Oct. 22, Fool contributors Jason Hall and Toby Bordelon respond to a member's question about investing in PayPal. 

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Jason Hall: OK, kids, we're 19 minutes into the show and we've got some questions that have come in here. Kingcon asks, this is from last hour: "John Rosevear was talking about a battery stock he's really interested in. SPAC merger hasn't closed yet, but it's been announced and they're moving toward closing, and the ticker is DCRC." Kingcon was asking that I'm going to try and get that in the Slido here in a few minutes. We do have a question here, I think is interesting. Steve's asking about PayPal.

Toby, I know you might want to take a stab at this one because you know PayPal a little bit here. Anyway, Steve's talking about PayPal. The stock price has fallen more than 10 percent after word came out about this Pinterest acquisition negotiation that's going on. Steve S is saying, "Do you think it's a good timely buy given that sell-off? Thanks in advance here." Toby, do you have any thoughts here?

Toby Bordelon: Yeah. Sorry, I'm looking at here. I was just checking a couple of sites to see if I see any news on that deal.

Jason Hall: What's happened?

Toby Bordelon: I was halfway expecting to see something come out after the market close today, but we don't have it yet, maybe before the weekend is over for market open on Monday. Something, either like here's our deal or we're not doing this, or we're in talks, and that's it. But some comment I would expect. But yeah, it has gone down, and that should give you pause. It tells you what shareholders in general think of this potential acquisition.

Now, that said, what we're talking about here is right now, I think PayPal's market cap is around $280 billion, $380 billion. It's around there. The numbers we've heard leaked or rumored would put Pinterest at about $45 billion. It's a significant deal, but it's not massive in relation to where PayPal is.

Jason Hall: It's just over $282 [billion].

Toby Bordelon: $282 [billion], there we go. I would not call it a timely buy given the drop. The reason it's dropping is because they announced -- well, it may not be the only reason but one reason it's dropping is because they didn't announce. We heard rumors of this potential acquisition and they didn't come out and acknowledge talks were happening or something to that degree. People are adjusting to that news.

The concern I had is that look,  it wasn't that long ago where they announced they were buying Paidy, which is a Japanese buy now pay, later company. They did another acquisition earlier this year. They've been doing a lot and you wonder, are they going to go to execute this? Are they going to be able to really integrate this?

What is their direction? What is their focus?  What are they actually trying to become? That's not clear to me. I see what they might be doing with Pinterest, but without any announcement, I'm not sure exactly what they want this company to look like in five years, and so there's some hesitation on that. What's the change in direction? If you hold or you're thinking to hold, if you've already been looking at it and you think, "I would like to buy some PayPal," you see this drop, maybe it's an opportunity.

But I would not just look at this drop itself, given what we know now, and say this is a great buying opportunity. I think there's some questions that have been raised by this news, and we want to see some answers to those, and I don't know if we're going to get those until we get our formal announcement of the deal or a formal statement saying it's not happening.

Toby Bordelon owns shares of PayPal Holdings and has the following options: short January 2022 $42 puts on Pinterest. The Motley Fool owns shares of and recommends PayPal Holdings and Pinterest. The Motley Fool recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.

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