Filed Under:  U.S. & World

Does it Make Sense for Google to Buy Paypal?

Contributed by on March 26, 2015 at 12:24 am

Ebay (NASDAQ:EBAY) is widely reported to be in the process of splitting itself into two. The company will be split based on its traditional auction business and its Paypal payment processing business. Paypal is the 800-pound gorilla of the global payment processing industry. This is a multibillion-dollar industry, and Paypal has a large chunk of that. It is one of the most solid brands in that space.

If the spinoff takes places according to plan, it might be a good time for Google (NASDAQ:GOOG)to seriously consider buying Paypal. You have to understand that Google stock is trading sideways right now. It hasn’t really kept pace with the growth of Facebook stock. It’s been definitely been left in the dust by Apple.

This is really too bad since Google has been one of the stock market’s long-running tech darlings. What happened? It appears that the market is finally beginning to grow impatient with Google. It simply isn’t growing fast enough to justify its market valuation.

To justify its relatively high PE ratio, Google has to make a bold move. Simply rattling off press releases regarding tomorrow’s technology and other pie in the sky announcement is not going work. It used to work five years ago. It doesn’t work now. It has to do something more decisive.

Buying Paypal will not just give Google another cash cow. It also gives Google a powerful asset to which it can plug all its content and data processing assets. Paypal would be a solid acquisition. If Paypal is spun off into a separate company, this is a definitely a good time to buy Ebay stock so that when the spun off Paypal stock materializes, you would be well-positioned for a Google buyout.