Pinterest soars as PayPal reportedly mulls acquisition

Yahoo Finance's Emily McCormick discusses Pinterest stock surge amid reports that PayPal is mulling its acquisition.

Video transcript

ZACK GUZMAN: Welcome back. We've got a market alert here, as we've seen Pinterest shares halted and resumed for trading twice now, after a Bloomberg report about a potential acquisition coming from PayPal. Of course, the social media darling has been beaten down a bit here in 2021 after we got back to normal life, started spending a little bit less time on social media applications such as Pinterest, at least what we've seen in the last two earnings reports. But for the latest there, I want to get to Yahoo Finance's Emily McCormick, who has the details behind that. Emily.

EMILY MCCORMICK: Well, Zack, as you mentioned, some news just crossing the tape here for PayPal and Pinterest. PayPal reportedly considering an acquisition of the social media company Pinterest, according to a report from Bloomberg. Now, based on that reporting, PayPal and Pinterest have discussed a potential price of around $70 a share for Pinterest. That would give the company a roughly $39 billion valuation and would represent a premium of about 26% compared to its closing price yesterday.

Now, the report did note that these discussions could ultimately fall through. Nothing is set in stone just yet. And the report was based on sources cited anonymously from the Bloomberg outlet. But again, if this deal were to go through, PayPal would be swooping in during a time when Pinterest value has declined.

Those shares have fallen by about 16% so far in 2021, whereas PayPal stock has advanced by 16% this year and by more than 150% since the start of 2020. So really, a lot of value creation, at least on the equity side, happening here for PayPal, again, really, because of that increase in usage with consumers turning to the fintech platform and especially Venmo over the course of the pandemic.

Now, if we take a look here at Pinterest, though, of course, Zack, as you were alluding to, the company really struggling with some usage and those monthly active users disappointing against consensus expectations for the second quarter, as people did start to go back out into the world and back out in real life and not necessarily using the social media platforms quite as frequently.

And in terms of some other challenges that the company has been contending with, one of those was an announcement just earlier this month that co-founder Evan Sharp was stepping down. He'd been leading design and product teams at Pinterest, so, again, quite a few crosscurrents here that have been impacting Pinterest stock and PayPal really potentially trying to swoop in here and buy this company while it's on sale.

ZACK GUZMAN: Yeah, I mean, this is a name, if you've been watching the show for a while, I've been hot on just because there's a couple of different factors here in terms of Pinterest being overlooked. We know the usage demographics, used by a wide-- the mix between female and male users is pretty wide. It's also across all the age gamuts. It's rare to see a social media app like Pinterest here do the things that it does without having the scrutiny of content, like we've seen from Twitter and Facebook.

And Pinterest really, some people might be scratching their heads here, Emily, in terms of why PayPal, but you think about how Facebook's Instagram really leaned into e-commerce with their Shop tab and what Pinterest had been trying to do over the last few quarters with really getting their shopping experience up to par, would make sense if PayPal sees maybe the opportunity there to swoop in and really partner up on that.

EMILY MCCORMICK: That's right, Zack, and I think one of the things that Wall Street analysts have really been talking about a lot with PayPal, as well as a number of these other fintech companies, has been this rise in the consumer trend towards buy now, pay later. And when you combine that with some of the shopping experiences, the visual shopping experiences that companies like Pinterest, as well as Instagram or other competitors like Snap, have been exploring, it does start to make a little bit more sense in terms of a tie-up and sort of what these synergies would actually look like between the two companies here.

And just taking a look at what stocks have also been moving on the heels of that announcement, really also kind of goes to show how investors are thinking about the competitive landscape and what a potential tie-up between PayPal and Pinterest could look like. I want to highlight that we're seeing shares of Etsy actually moving higher by more than 2%. That, of course, being a digital first e-commerce platform is something that sort of also falls into that newly IPOed or relatively newly IPOed companies, focusing on e-commerce, focusing on that sort of scrapbooking type quality and user experience.

And then you take a look here at Twitter also moving to the upside as well, up more than 1%. So, clearly, investors do you think that there could be a little bit of upside for these companies as well if Pinterest were taken away as one of the competitors within this space specifically. But I think it will be interesting to monitor these talks, see where this eventual deal lands, and how that pricing actually ends up, assuming it goes through, for Pinterest.

ZACK GUZMAN: Yeah, I mean, even if they do get it here, I mean, we're talking about a $70 price target potentially off that Bloomberg report. Still trading below that right now, so the market maybe not buying it completely. But even then, still about a 30% decline from those highs we saw back in February. So, potential steal here for PayPal, depending on the way you want to look at it. But Emily McCormick bringing us the latest there on potential interest in Pinterest.