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PayPal Acquires Honey Science, Boosts E-commerce Presence

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PayPal Holdings, Inc. (PYPL - Free Report) has acquired Honey Science Corp. for a hefty amount of about $4 billion in a bid to expand beyond the core payments business.

Founded in 2012, Honey Science is an online coupon startup. The company amasses valuable data on consumer buying habits and offers coupons for online bargains. Its software tracks prices across 30,000 online retailers and sends alerts to users regarding attractive deals.

It has approximately 17 million monthly online and mobile users that are likely to improve PayPal’s customer base.

The latest deal marks PayPal’s biggest acquisition to date. This acquisition will strengthen its presence in the e-commerce market. The deal is likely to help the company expand globally and accelerate development of new products.

PayPal Holdings, Inc. Price and Consensus


Deal Rationale

In today’s fast moving world, e-commerce has gained immense popularity driven by increased penetration of internet and mobile phones. The e-commerce market has resulted in growing proliferation of online payment services and apps.

Therefore, it has become very important for any company to keep innovating new ways to cement ties with customers and become more useful to merchants. Also, increasing competition from internet giants such as Apple (AAPL - Free Report) and Alphabet (GOOGL - Free Report) has made it mandatory for companies like PayPal to always stay on their toes to keep customers and market share intact.

We believe that Honey Science, which has access to large amount of customer data, will likely help PayPal to get new source of data and insights into online shopping behavior of consumers. This will help the company to reach deeper into online purchases, and offer a wider range of services to consumers and merchants.

Also, the data could be used by PayPal for important purposes like fraud prevention. It would help online merchants to spot fraudsters and improve risk management.

We believe the company’s customer base is likely to get a near-term boost from the latest acquisition.

Deepening Focus on E-commerce

The latest move bodes well for its growing focus on the e-commerce sector.

Apart from the Honey acquisition, PayPal acquired Hyperwallet, which is a payout platform that offers integrated payment solutions to enterprises, marketplaces, e-commerce and on-demand platforms. Consequently, PayPal is now able to offer end-to-end payment solutions to marketplaces and e-commerce companies, making their payment processes smoother and hassle free.

Further, PayPal’s plans to acquire Simility that develops fraud prevention technology solutions are a major positive. With this buyout, the company strives to deliver effective risk management solutions to e-commerce companies and online merchants.

We believe all the strong endeavors will continue to aid its position in the e-commerce market.

Zacks Rank & Key Pick

Currently, PayPal carries a Zacks Rank #3 (Hold). A better-ranked stock in the broader technology sector is Advantest Corp. (ATEYY - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Advantest is currently projected at 15.5%.

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