Xoom Corp.: Overvalued, Hidden Risks, No Competitive Advantage
John Zhang • 15 Comments
John Zhang • 15 Comments
Nov. 12, 2015, 9:42 AM
- PayPal's (PYPL -2.5%) $890M, all-cash, acquisition of online money transfer/remittance provider XOOM (first announced on July 1) is on the books.
- Xoom will continue operating as a separate service, and CEO John Kunze will join PayPal's executive team (reporting to PayPal chief Dan Schulman). As previously announced, the deal is expected to be slightly dilutive to 2016 EPS.
- Last week, Xoom reported Q3 revenue of $42.4M (+8% Y/Y) and a non-GAAP net loss of $2.8M. Gross sending volume totaled $1.9B (+12%), and active customers 1.47M (+21%).
- PayPal is adding to the moderate losses seen yesterday following a report Apple is planning to launch a mobile P2P payments service.
Sep. 4, 2015, 4:51 PM
- As expected, XOOM shareholders have signed off on PayPal's (NASDAQ:PYPL) $890M ($25/share) acquisition of the company. 95.17% of the votes represented at a special meeting were cast in favor.
- PayPal/Xoom previously stated the deal is expected to close in Q4. Xoom notes it still needs to receive "certain regulatory consents."
Jul. 2, 2015, 5:45 PM
- EBAY closed up 2.4% following news PayPal (Pending:PYPL) is buying top online international money transfer service XOOM for $890M. With PayPal now just 18 days away from trading separately, eBay is within $1.50 of a 52-week high of $63.30. Western Union had a less favorable reaction to the deal.
- Street reactions to the purchase have been largely positive. SunTrust's Bob Peck: "We see synergies/opportunity between Xoom and [mobile payments platform] Venmo inside the PayPal ecosystem enabling lower cost (ACH, or debit worse-case) wallet funding (PayPal, Paydiant) and in-market and cross-border [consumer-to-consumer] and [consumer-to-business] transactions. This could serve to sustain relevance on the consumer side and (interrelated) preserve/lower funding cost and strengthen the value proposition on the merchant side."
- Baird's Colin Sebastian: "Both PayPal and Xoom have competitive advantages from fraud-detection technology underlying their respective products. While Xoom’s engine was initially built using concepts borrowed from PayPal, they have since extended the functionality to peer-to-peer international remittance..."
- Keefe, Bruyette & Woods' Sanjay Sakhrani: "[I]nternational money transmittance is a highly adjacent business to P2P payments and digital wallets, which is PayPal's core business…Despite a fairly rich valuation, XOOM is growing quickly and brings to the table a scalable, bolt-on platform to help offer additional value-add..." Morgan Stanley's Brian Nowak sees an opportunity to significantly expand Xoom's op. margin (4% in 2014).
- Xoom closed at $25.05, slightly above PayPal's $25/share buyout price. SunTrust's Andrew Jeffrey thinks Western Union and/or Internet companies could make a rival bid. Baird's Sebastian: "Higher bid from traditional money transfer company still plausible given a PayPal-Xoom combination presents a much greater (and better-capitalized) competitive threat."
Jul. 1, 2015, 6:06 PM
Jul. 1, 2015, 5:40 PM
- PayPal (EBAY, PYPL) is acquiring leading online money transfer/remittance service provider XOOM for an enterprise value of $890M, or $25/share, in cash.
- The price represents a 21% premium to Xoom's Wednesday close. The deal comes ahead of PayPal's mid-July spinoff into a separate, publicly-traded, company. XOOM has been halted.
- PayPal president/soon-to-be-CEO Dan Schulman: "Expanding into international money transfer and remittances aligns with our strategic vision to democratize the movement and management of money ... Xoom's presence in 37 countries in particular, Mexico, India, the Philippines, China and Brazil will help us accelerate our expansion in these important markets."
- The deal is expected to close in Q4, and be slightly dilutive to PayPal's 2016 EPS. PayPal plans to pay for it with existing cash. Xoom will operate as a separate service within PayPal.
- Recent PayPal acquisitions include white-label mobile payments services provider Paydiant, cybersecurity software firm CyActive, and rival online/mobile payments service provider Braintree.
May 6, 2015, 11:05 AM
- Xoom (XOOM +1.9%) appears to be getting a lift from a Bloomberg report stating Western Union is in talks to buy long-time money transfer rival MoneyGram.
- Western and (especially) MoneyGram have soared on the report. Should a deal be inked, Western/MoneyGram will likely cite the existence of online/mobile rivals such as Xoom as a reason why antitrust regulators should clear it.
- Last week: Xoom soars following Q1 beat, in-line 2015 guidance