Why Pinterest Stock Jumped 13% on Wednesday

Shares of Pinterest (NYSE:PINS) exploded with rumours that PayPal Holdings (NASDAQ:PYPL) may acquire the company.

| More on:
Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept

Image source: Getty Images

Pinterest (NYSE:PINS) climbed 13% in morning trading on Wednesday from news PayPal Holdings (NASDAQ:PYPL) may be acquiring the social media company.

What happened?

Rumours have been spreading for quite some time that PayPal stock would be purchasing Pinterest stock. And the reason is obvious. Mega-companies similar to PayPal have been making partnerships for years in this vein and trying to make them shoppable. The growth of e-commerce has seen to that.

But while Pinterest stock climbed 13%, PayPal stock fell 4% in morning trading. And that could be because, of course, the deal comes with a big price.

So what?

In the past, PayPal stock has discussed purchasing Pinterest stock for about US$70 a share. As of writing, shares trade at US$62 per share, and that’s after the mega growth of the morning. That would put Pinterest’s value at around US$39 billion. And Pinterest stock now has beat that, trading at US$39.9 billion at writing — an increase of about US$1 billion overnight.

So, therein lies the issue. Investors in PayPal stock likely think the company is overpaying and then some for Pinterest stock. Meanwhile, should the value be there, those investing in Pinterest stock are climbing on that bandwagon in droves.

That being said, it’s not a huge issue, as PayPal stock has the money. It’s done quite well due to the e-commerce boom during the pandemic. It’s been growing through its payment app and has an earnings report due Nov. 9. So, such an announcement could be seen as positive proof of further growth.

Now what?

Honestly, if you look at PayPal stock, it looks like a solid deal. Really, both still do, according to analyst predictions. Shares of Pinterest stock were set to climb to US$70 in the next year, and that could happen by end of day. Meanwhile, with PayPal stock down, now could be a solid time to jump on the stock — especially as analysts give it a potential upside of 25% as of writing.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends PayPal Holdings and Pinterest. The Motley Fool recommends the following options: long January 2022 $75 calls on PayPal Holdings.

More on Tech Stocks