Pinterest (PINS) - Get Pinterest, Inc. Class A Report shares surged Wednesday ending the day up nearly 13% following a report that suggested the social media site could be a takeover target of online payments group PayPal (PYPL) - Get PayPal Holdings Inc Report.
Bloomberg News reported Wednesday that PayPal is looking at purchasing the image-sharing social media platform, noting talks of a potential price of $70 a share, a level that would value Pinterest at around $39 billion. Credit Suisse analyst Stephen Ju estimates Pinterest's fair value at around $62 per share, "based on an 11% weighted average cost of capital and a 3% terminal growth rate."
"Higher-than-expected capital intensity, slower-than-expected advertiser (and budget) growth, as well as longer-than-anticipated headwinds from COVID-19 are risks to our price target and estimates," he said in a recent client note.
Pinterest officials declined to comment on the report when contacted Wednesday by TheStreet.
PayPal has been active in the payments sector of late, inking a $2.7 billion deal for Japan-based 'buy now, pay later' firm Paidy last month and unveiling plans to allow customers the ability to buy goods and services with cryptocurrencies at more than 29 million merchants around the world in what may be the biggest single effort to normalize digital purchases.
Pinterest shares closed 12.75% higher on the session at $62.68 each, a move that trims their year-to-date decline to around 8%. PayPal closed 4.9% lower at $258.36 each.
Pinterest's Wednesday share price would peg the group's value at roughly the same level it was in late July, when Pinterest reported disappointing gains in active users that overshadowed an otherwise solid second-quarter earnings report.
Pinterest said overall monthly active users rose only 9% from last year to 454 million, well shy of the Refinitiv forecast of $487.1 million, and much slower than the 30% gains recorded over the first three months of the year. U.S. users fell 5% to 91 million, compared to a 9% gain in the first quarter.
Revenues more than doubled to $613 million, firmly topping analysts' estimates of a $562.1 million tally, while non-GAAP earnings were pegged at 25 cents per share, more than 10 cents ahead of the Street consensus forecast.
Pinterest will publish its third quarter earnings on Wednesday, October 27, with analysts looking for a non-GAAP bottom line of 23 cents per share on revenues of $631.24 million.