Loeb’s Third Point Takes PayPal Stake, Sees Stock Rising to $125
Dan Loeb’sThird Point has taken a stake inPayPal Holdings Inc. in a vote of confidence for the payments processor as it faces increasing competition from the likes ofAmazon.com Inc.
The New York-based hedge fund said Paypal stock could reach $125 per share within 18 months on above-consensus earnings, according to an investor letter obtained by Bloomberg. The size of the stake, which was acquired during the second quarter, wasn’t disclosed.
Third Point detailed three revenue opportunities that it thinks PayPal can benefit from: Its Venmo platform, dynamic pricing and offline payments.
“We see parallels between PayPal and other best‐in‐class internet platforms like Netflix and Amazon: High and rising market share, untapped pricing power, and significant margin expansion potential,” Third Point said the letter.
A representative for PayPal said the company appreciates the investment.
PayPal shares are up 18 percent this year to about $87, valuing the company at about $103 billion. In May, itannounced a deal to acquire Swedish small-business platform iZettle for $2.2 billion to help it expand in Europe and Latin America and compete with rival Square Inc.
San Jose, California-based PayPal is facing a new threat from Amazon, which isoffering to pass along discounts it gets on credit-card fees to other retailers if they use its own online payments service, people familiar with the matter said in May.
The fees charged on a typical credit-card transaction amount to about 2 percent of the total, with a charge of 24 cents for debit-card payments. Big retailers like Amazon andWalmart Inc. are able to negotiate lower rates based on their massive purchasing power. Amazon is offering to pass along those discounts to at least some smaller merchants to encourage use of its Amazon Pay product, the people said at the time.
Activist investor Carl Icahn led a lengthy battle at EBay Inc. from 2014, agitating for the company to spin off PayPal, a move it eventually agreed to and was completed in 2015. Icahn sold down his stake in Paypal to less than 1 percent last year.
— With assistance by Spencer Soper, Jennifer Surane, and Julie Verhage
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