The purchase of Square would give PayPal increased acceptance with bricks and mortar retailers, Loop Capital analyst Joseph Vafi wrote in a note Tuesday. All in, the deal would further PayPal's efforts to become a "true, two sided network," according to Vafi.
Vafi estimates PayPal would be able to pay a 30% premium for Square, valuing the company at more than $12 billion using current prices.
As TheStreet pointed out recently, Square has several attractive qualities that could catch the attention of suitors. Chief among them is its growing international reach.
International payments is one of Square's four "pillars" of growth, Chief Marketing Officer Kevin Burke explained during the company's May investors day.
Outside of the U.S., San Francisco-based Square operates in Canada, Japan, Australia and the UK. "That represents about 40% of household consumption in the world," Burke said. "So we're making good progress, but there's still another $24 trillion out there."
PayPal's shares rose 2.3% to $56.02 each on Wednesday morning. Square's fell 0.5% to $25.32.
Visit here for the latest business headlines.