Daniel Loeb’s Third Point unveils new position in PayPal

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Daniel Loeb, founder and chief executive officer of Third Point LLC

Third Point hedge-fund manager Daniel Loeb revealed in an investor letter that his fund has new position in PayPal.

The firm added the position in the second quarter, according to an investor letter obtained by CNBC.

“Consumers love PayPal because it enables hassle‐free, one‐touch checkout across millions of online merchants,” Loeb said in the note to clients Monday. “We see parallels between PayPal and other best‐in‐class internet platforms like Netflix and Amazon: high and rising market share, untapped pricing power, and significant margin expansion potential.”

The investor cited how PayPal has 237 million active accounts and 19 million merchants using its checkout payment solution, which is a ten times size advantage versus its competitors.

Loeb predicts PayPal will generate earnings per share above expectations. He forecasts its shares will rise to $125 within eighteen months, representing 43 percent upside to Friday’s close.

“PayPal is just scratching the surface on pricing power: the company recently shifted away from a ‘one‐size‐fits‐all’ approach in merchant contracts to a dynamic pricing model that reflects the value‐add of a growing suite of products,” he said.

When asked for comment a PayPal spokesperson said, “We appreciate the investment in our company.”

The company’s stock is up 1.1 percent Monday, paring its earlier loss.

The Third Point Offshore Fund is up 0.8 percent this year through June versus the S&P 500’s 2.6 percent return, according to the letter.