Private equity giant KKR & Co. (KKR) has reached a deal to purchase up to 65 billion euros (US$75.4 billion) of PayPal’s (PYPL) European buy now, pay later (BNPL) loans.
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The deal builds on an earlier agreement that saw KKR buy most of PayPal’s European BNPL receivables. Buy-now, pay-later products are popular with younger consumers, particularly Millennials and Gen Z, who use short-term loans to cover everyday purchases and expenses.
BNPL loans are particularly popular when shopping online. As such, a growing number of retailers are adopting the service, pushing lenders and investment firms such as KKR to increase their exposure to the sector.
Profit Growth Forecast
The deal PayPal has struck with KKR is a type of asset-based financing that sees companies borrow money secured against specific assets such as receivables, inventory, and/or equipment. PayPal said in a news release that the deal with KKR is accounted for in its full-year profit growth forecast.
Going forward, PayPal will remain responsible for all of its customer-facing BNPL activities, including underwriting its European BNPL loans. In October of this year, PayPal raised its profit forecast for the entire year and announced its first dividend payment to shareholders.
Is KKR Stock a Buy?
KKR stock has a consensus Strong Buy rating among 10 Wall Street analysts. That rating is based on 10 Buy recommendations issued in the last three months. The average KKR price target of $157.20 implies 34.27% upside from current levels.
