PYPL challenging SQ?

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Paypal is buying iZettle for $2.2B.

https://finance.yahoo.com/news/paypal-confirms-buying-paymen…

iZettle has operations in 12 markets, including several in northern Europe and Mexico in Latin America where PayPal doesn’t have an extensive offline presence, such as Brazil, Denmark, Finland, France, Germany, Italy, Mexico, Netherlands, Norway, Spain and Sweden. (Its Latin American expansion was made by way of a strategic investment from the Spanish bank Santander.) iZettle is very strong also in the UK, so will help PayPal strengthen its business in that market at a time when Square has finally emerged as a competitor there.

Just wondering how this will affect Square.

thoughts?

Peace,
Dana

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thoughts?

$2.2B, all cash deal, which is about 1/3rd of PayPal’s stash of cash. iZettle also known as the “Square” of Europe. Improves PayPal’s int’l presence and POS exposure in one shot.

Immediately, it will probably not affect Square much, as iZettle and Square don’t have too much geographic overlap, though SQ is expanding in the UK now. Long term, it probably hurts Square’s int’l growth and makes PayPal a much more formidable omnichannel competitor. Interesting acquisition.

TechCrunch has good article on the acquisition:

The deal — which is expected to close in Q3 2018 — will see iZettle’s co-founder and CEO Jacob de Geer stay on to lead iZettle. He will report to PayPal’s COO Bill Ready. Others in iZettle’s exec team will also stay on to run the business, which will become a “center of excellence” for in-store and offline payments in Europe, PayPal said.

Read more at https://techcrunch.com/2018/05/17/paypal-confirms-that-it-is…

Matt
Long PYPL, SQ
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/TMFCochrane/info.aspx

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This aquisition activity (by both companies) is getting a little nuts.

Peace,
Dana

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I haven’t dug into the details of the transaction by PayPal but this should be quite good for them long term probably makes sense to buy more PYPL, solid performer, great management, reasonable valuation. I own Square also.

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This aquisition activity (by both companies) is getting a little nuts.

It’s the whole payments/fintech sector, Dana.

Mastercard gobbles up companies left and right. Vocalink is the crown jewel (https://www.fool.com/investing/2018/05/09/the-acquisition-gi…) but there are several others that seem to be working out too: https://www.fool.com/investing/2017/12/27/how-recent-acquisi….

Visa isn’t sitting still, even as it digests the Visa Europe acquisition: https://www.fool.com/investing/2018/03/05/visa-eyes-huge-b2b…

Total Systems recently acquired Cayan, a cloud-based point-of-sale platform: https://www.fool.com/investing/2018/02/01/total-system-servi…

First Data has made two major acquisitions in last year, BluePay and CardConnect, one which bolstered its e-commerce capabilities and the other gave it new POS features: https://www.fool.com/investing/2018/05/18/the-biggest-takeaw…

Vantic acquired WorldPay for $10B earlier this year: https://www.fool.com/investing/2018/03/27/questions-remain-b…

Global Payments acquired Active Networks last year for about $1B: https://www.fool.com/investing/2017/08/17/global-payments-ac…

And that says nothing to PayPal’s or Square’s recent activity. It’s just a space that is showing so much innovation and advancements that a company cannot simply afford to fall behind. It’s a true arms race. That being said, several of the above, have so much cash flow that these acquisitions are not adding to debt at all. Those with debt, like First Data, are probably most at risk.

Matt
Long GPN, MA, PYPL, SQ
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/TMFCochrane/info.aspx

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Thank you Matt for the generous reply. This is exactly how I picture the fintech landscape (without knowing nearly what you do about it). I’m inclined at my ripe old age (ack!) to stay away. I can see a younger investor maybe wanting a basket of stocks in this area but man, too scary for me. When I see everyone doing the same thing it makes me think that not everyone is going to survive. In the end it will be those with the best products, not the most products, who wins. Switching is not the big deal it used to be. Maybe I’m wrong, maybe paranoid and maybe they’ll all survive but right now it is too hard (for me) to tell who might come out on top. I don’t really see a differentiator.

Peace,
Dana

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I’m inclined at my ripe old age (ack!) to stay away. I can see a younger investor maybe wanting a basket of stocks in this area but man, too scary for me.

Too scary for you, Dana! I didn’t know there was such a thing! :slight_smile:

The only thing I would add is that to remember the wind is at the industry’s back. While it’s a tough neighborhood, the overall market is growing. Just look at the growth Visa alone is looking at in a place like India, where the CEO said in its most recent conference call that the number of merchants accepting card payments had doubled since 2016’s Q4. Over last year, as competition has ramped up, all are nicely up, beating the market believe it or not.

Also, while the payment processing companies battle it out at the merchant level, they all direct more traffic to the MA/V payment networks. For instance, when a farmer’s market or food truck begins to use Square where previously only cash had been accepted, that’s new revenue for MA and V. MA and V win almost no matter what with very little competition around the world.

PayPal is great because it rules mobile payments. This quarter, the company processed $49 billion in mobile payment volume – payments originating from a mobile device – good for a 52% increase year over year. Mobile payment volume now accounts for 37% of the company’s total payment volume. While PayPal competes around the edges with SQ et al, it doesn’t really do so directly.

Of the processors, I really like SQ’s and GPN’s position. I don’t think there’s any reason to rehash the bull case for SQ, but I wrote about GPN’s last quarter here: https://www.fool.com/investing/2018/02/21/3-ways-global-paym… I liked its most recent quarter just as much. Anyway, those are just my thoughts.

Matt
Long GPN, MA, PYPL, SQ
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/TMFCochrane/info.aspx

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Ah Matt, you know me pretty well. : )

Thanks for the info. I actually have some portion of my portfolio set aside for trading purposes and both MA and V have been there at times. I do like those. Will have to look at GPN. At the moment this trading portion of full of other stuff but will probably rotate back into V or MA. I think my affair with SQ (hey I rhymed!) is over for now though.

Peace,
Dana

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