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PayPal (PYPL) to Sell Europe BNPL Loan Receivables to KKR
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PayPal (PYPL - Free Report) signed a multi-year agreement with one of the global investment firms, namely KKR, to sell its European buy now, pay later (BNPL) loan portfolio.
Per the terms, the agreement is a EUR 3 billion replenishing loan commitment under which KKR's private credit funds and accounts will acquire up to EUR 40 billion of BNPL loan receivables originated by PayPal in France, Germany, Italy, Spain and the United Kingdom.
Nevertheless, PayPal will continue to take care of the customer-facing activities associated with its European BNPL products, like underwriting, servicing and others.
The deal is a win-win situation for both companies.
On the back of the latest partnership, KKR will be able to strengthen its presence in the consumer finance space.
PayPal will not only be able to bolster its Pay Later originations in Europe but also boost its cash balance, which, in turn, will likely aid it in executing other strategic plans.
The latest deal is expected to close in the second half of 2023, upon which it is expected to generate $1.8 billion in sale proceeds for PayPal.
PayPal plans to use this fund for its general corporate financing and shareholders’ returns. It intends to increase its share repurchases by allocating around $1 billion to this purpose.
The company also upgraded its outlook for 2023 share repurchases. Its total share repurchases are now expected to be worth $5 billion for 2023.
We believe increasing share repurchase activities will instill investor optimism in the stock in the days ahead.
PayPal has lost 3.2% on a year-to-date basis against the industry’s growth of 48.5%.
PayPal’s BNPL Efforts
PayPal’s robust BNPL offerings have made it one of the biggest BNPL players in the global market. Moreover, its strong BNPL portfolio makes it attractive to customers as well as investors.
Notably, it generated above $20 billion of BNPL payment volume globally in 2022, which was up approximately 160% from 2021.
PayPal, which forayed into the BNPL market in 2020, now offers PayPal Pay Monthly, which lets customers break the total cost of their purchased item into monthly payments.
Further, the company’s acquisition of Paidy — a Japan-based BNPL solution provider — remains noteworthy.
The introduction of the Pay in 4 service — PayPal’s first BNPL solution in Australia — is another positive. The service is free of any interest, payment fees or sign-up fees.
Image: Bigstock
PayPal (PYPL) to Sell Europe BNPL Loan Receivables to KKR
PayPal (PYPL - Free Report) signed a multi-year agreement with one of the global investment firms, namely KKR, to sell its European buy now, pay later (BNPL) loan portfolio.
Per the terms, the agreement is a EUR 3 billion replenishing loan commitment under which KKR's private credit funds and accounts will acquire up to EUR 40 billion of BNPL loan receivables originated by PayPal in France, Germany, Italy, Spain and the United Kingdom.
Nevertheless, PayPal will continue to take care of the customer-facing activities associated with its European BNPL products, like underwriting, servicing and others.
The deal is a win-win situation for both companies.
On the back of the latest partnership, KKR will be able to strengthen its presence in the consumer finance space.
PayPal will not only be able to bolster its Pay Later originations in Europe but also boost its cash balance, which, in turn, will likely aid it in executing other strategic plans.
PayPal Holdings, Inc. Price and Consensus
PayPal Holdings, Inc. price-consensus-chart | PayPal Holdings, Inc. Quote
Deal Rationale
The latest deal is expected to close in the second half of 2023, upon which it is expected to generate $1.8 billion in sale proceeds for PayPal.
PayPal plans to use this fund for its general corporate financing and shareholders’ returns. It intends to increase its share repurchases by allocating around $1 billion to this purpose.
The company also upgraded its outlook for 2023 share repurchases. Its total share repurchases are now expected to be worth $5 billion for 2023.
We believe increasing share repurchase activities will instill investor optimism in the stock in the days ahead.
PayPal has lost 3.2% on a year-to-date basis against the industry’s growth of 48.5%.
PayPal’s BNPL Efforts
PayPal’s robust BNPL offerings have made it one of the biggest BNPL players in the global market. Moreover, its strong BNPL portfolio makes it attractive to customers as well as investors.
Notably, it generated above $20 billion of BNPL payment volume globally in 2022, which was up approximately 160% from 2021.
PayPal, which forayed into the BNPL market in 2020, now offers PayPal Pay Monthly, which lets customers break the total cost of their purchased item into monthly payments.
Further, the company’s acquisition of Paidy — a Japan-based BNPL solution provider — remains noteworthy.
The introduction of the Pay in 4 service — PayPal’s first BNPL solution in Australia — is another positive. The service is free of any interest, payment fees or sign-up fees.
Zacks Rank & Stocks to Consider
Currently, PayPal carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Palo Alto Networks (PANW - Free Report) , NVIDIA (NVDA - Free Report) and AMETEK (AME - Free Report) . PANW and NVIDIA currently sport a Zacks Rank #1 (Strong Buy), and AME carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Palo Alto Networks shares have gained 65% in the year-to-date period. The long-term earnings growth rate for PANW is projected at 31.5%.
NVIDIA shares rallied 173.8% in the year-to-date period. Its long-term earnings growth rate is projected at 23.02%.
AMETEK shares have grown 10.2% in the year-to-date period. The long-term earnings growth rate for AME is projected at 8.95%.