PayPal Looks To Become Part Of Everyday Life With Its Newest Acquisition

BTIG’s Mark Palmer noted Paypal Holdings Inc PYPL intends to accelerate its entry into the bill payment category with the acquisition of TIO Networks.

The analyst maintained a Buy rating on PayPal, with a price target of $48.

Latest Acquisition

“One of the factors driving our bullish thesis on PayPal Holdings has been the company’s ability to deploy the $6.5bn of cash it had on its balance sheet as of YE16 through acquisitions that would further expand the functionality and ubiquity of its payments platform,” Palmer mentioned.

After Tuesday's close, PayPal announced the acquisition of Vancouver-based bill payment processor, TIO Networks, for $233 million in cash.

While this is unlikely to have a significant impact in the near term, the analyst expects it to help PayPal “move closer to its goal of becoming a part of consumers’ everyday financial lives.”

The purchase price of C$3.35 per share represents a 6.7 percent premium to TIO Networks’ closing price, and a 22.6 percent premium to the 20-day volume weighted average price as of January 9, the day before the company entered into negotiations with PayPal.

Related Link: Look For PayPal's Growth Momentum To Continue In 2017

The Opportunity

Palmer pointed out TIO Networks processed over $7 billion in consumer bill payments and 60 million transactions in the fiscal year ended July 31, 2016.

“The company serves 14mm consumer bill pay accounts that facilitate payments for 10,000 supported billers and numerous direct relationships with billers in the telecom, wireless, cable and utility industries,” the analyst went on to say.

Apart from its digital platform, TIO Networks also operates 900 self-service kiosks and about 65,000 walk-in locations where customers can pay their bills.

“PYPL said there would be no change to its FY17 guidance or its three-year outlook based on the acquisition of TNC,” Palmer added.