Morningstar

PayPal: Company Announces Deal to Sell BNPL Loans to KKR

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Securities In This Article
PayPal Holdings Inc
(PYPL)

PayPal PYPL announced that it has reached a multiyear agreement to sell substantially all its existing and future European buy now, pay later, or BNPL, loans to KKR. PayPal introduced its BNPL offering in 2020 and has had significant growth since, processing over $20 billion in BNPL volume in 2022. Strategically, we like this move, as we view offloading credit risk as a positive for payment processors. Additionally, given the still nascent nature of BNPL offerings and the uncertainty around future performance of BNPL offerings, we think this deal removes an element of risk for PayPal. The deal is expected to close in the back half of the year and to generate $1.8 billion in proceeds. As a result, management increased its expectations for stock repurchases this year to $5 billion. Given that we view shares as materially undervalued, we like the decision to increase capital return this year. We will maintain our $135 fair value estimate and narrow moat rating.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Brett Horn, CFA

Senior Equity Analyst
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Brett Horn, CFA, is a senior equity analyst, AM Financial Services, for Morningstar*. He covers P&C insurers and payment companies. He also developed the insurance valuation model by the equity research team.

Before joining Morningstar in 2006, Horn worked in the banking industry for about a decade, most recently as a commercial loan officer for First Bank, where He was responsible for underwriting loans and managing relationships with middle market clients. Before that, Horn worked for Mizuho Corporate Bank, where He managed loan portfolios and client relationships, primarily with Fortune 500 companies.

Horn holds a bachelor’s degree in business administration, with a concentration in finance, from the University of Wisconsin. Horn also holds a master’s degree in business administration from the University of Illinois. He also holds the Chartered Financial Analyst® designation.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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