PayPal to Acquire Xoom – Street Takeaways

PayPal to Acquire Xoom – Street Takeaways:

CRT analyst Robert Coolbrith
Initial take on the deal is positive; sees strong revenue synergy potential via cross-sell and expanding Xoom into additional international markets leveraging the PayPal network; believes PayPal can efficiently feed new customers to Xoom, which has historically faced higher customer acquisition costs; believes deal can potentially accelerate PayPal’s penetration of key growth markets in APAC and LATAM, while deepening relationships within key growth demographics in the US market; views deal as reasonably priced given Xoom’s growth prospects
Target is $62
Maintains Fair Value rating

Mizuho analyst Neil Doshi
Generally positive on the transaction; while Xoom’s 1.3M users seem small, believes real benefit will come from cross-selling Xoom’s services to PayPals 68M US customers; believes PayPal could leverage Xoom’s platform in the future to enable cross-border transactions between international markets; notes purchase price implies a hefty multiple of 37x 2015E EBITDA and 25x 2016E EBITDA; suspects PayPal looked at TransferWise but may have passed on valuation
Target is $65
Maintains Neutral rating

JMP analyst Ronald Josey
Often thought that PayPal would naturally extend its product offering to include money transfers – with Xoom, believes PayPal achieves automatic scale given Xoom’s 1.3M active customers and $7B sent on a TTM basis; believes PayPal can help Xoom expand to additional countries and markets more rapidly, while also broadening PayPal’s product offering; believes Xoom has a strong presence in India, the Philippines, Mexico, China, and Brazil
Maintains Market Perform rating

RW Baird analyst Colin Sebastian
Believes combination makes strategic sense and provides PayPal with incremental long-term growth opportunities; views move consistent with PayPal’s more explicit focus on international remittance; believes PayPal’s global scope makes it easier to roll out Xoom’s product to new transfer corridors with pre-existing regulatory approvals and merchant relationships; believes access to PayPal’s user base could help reaccelerate growth; believes a higher bid from a traditional money transfer company is still plausible
Target is $69
Maintains Outperform rating

SunTrust analyst Robert Peck
Highlights obvious near-term reasons for the deal; believes PayPal can extend and accelerate the Xoom footprint and can cross-sell in the US; sees synergies and opportunity between Xoom and Venmo inside the PayPal ecosystem enabling lower cost wallet funding and in-market and cross-border C2C and C2B transactions; believes deal could sustain relevance on the customer side and preserve/lower funding cost and strengthen the value prop on the merchant side; expects PayPal to acquire assets to further the franchise and address vulnerabilities; expects other suitors could come forward
Target is $62
Maintains Hold rating

Susquehanna analyst James Friedman
Believes PayPal will look to cross-sell services into its large user base; notes PayPal has the verified ACH accounts that Xoom was aspiring to attract; excluding revenue synergies, estimates the acquisition will add 2% to PYPL revenues and 1-2% to EBITDA; sees potential for revenue synergies – notes that 10M customers remitting $5K per year at a 2% take rate would add $1B to revenues
Target is $75
Maintains Positive rating