That was the first hot take on the news that crossed the wires Wednesday afternoon that PayPal was exploring a deal to buy Pinterest. It was a logical initial reaction as PayPal is a payment platform that happens to own Venmo and is dabbling in crypto. But now that the news has sunk in, some on Wall Street are starting to see some merit to the deal even if it took 10 hours.
We see technology companies competing to serve consumers across entertainment, information and commerce functions. The deeper a company can penetrate a consumer s daily activity think Amazon providing TV programming, advertising messages, home hub interactivity and product delivery the more long-term economic value that company can potentially provide from its relationship, explained Guggenheim Securities analyst Michael Morris. To the extent companies with unique functional strength and financial power see opportunity to add a consumer touchpoint to their portfolio, we believe the current low capital cost environment and concern about inflation may drive more aggressive consolidation exploration than we have previously seen. Multiple reports have PayPal in talks to acquire Pinterest in a range of $40 billion to $45 billion mostly in stock. The timing of any deal remain uncertain, the reports say. PayPal shares plunged more than 13% on the reports, while Pinterest shares jumped 5% amid concerns the deal would dilute existing shareholders.
PayPal's stock fell another 5% on Thursday, while Pinterest dropped 3%. Both stocks have been the top trending tickers on the Yahoo Finance platform since the deal news broke.
Not everyone on the street is sold on the potential combination, which would take PayPal into the budding land of social commerce.
Mizuho Securities analyst Dan Dolev's user growth is decelerating after a year of strong upside with people home during the pandemic, said Dan Dolev in a note. On PayPal's side, we think the firm could be looking at a proposed deal in a push to further integrate e-commerce and social media together to provide additional avenues of transaction growth. Zino cut his rating on Pinterest to Buy from Strong buy.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter and LinkedIn.