Each week, Industry Focus: Financials host Jason Moser and Fool.com contributor Matt Frankel, CFP, discuss the stocks that they're keeping an eye on. This week, Frankel is watching Fidelity National Information Services (FIS 0.75%) after its game-changing announcement that it plans to acquire leading payment-processing company Worldpay. Moser, on the other hand, has his eye on PayPal (PYPL 3.71%) after the fintech giant's recent investment in MercadoLibre (MELI 3.01%).
A full transcript follows the video.
This video was recorded on March 18, 2019.
Jason Moser: Alright, it's that time of week. We're going to wrap things up here, Matt, but before we do, we want to give our listeners one to watch. What is your One to Watch this week?
Matt Frankel: Fidelity National Information Services, ticker FIS. They just announced they're acquiring Worldpay, which gives them an instant No. 1 market share with payment processing. If you could buy an instant No. 1 market share in the up-and-coming payment-processing business that we're always raving about, that's a pretty good move in my book. If you're not familiar, Worldpay is the No. 1 market share in merchant payments, primarily focused on e-commerce. They process about 40 billion transactions per year -- not dollar amount, 40 billion individual transactions.
This is a big, big merger. They're getting $35 billion for the company. It's a cash and stock deal. As would be expected, Fidelity National's stock actually dropped a little bit after the merger announcement. That normally happens. Usually, the acquirer drops a little bit because they're paying a big premium, they're taking on some debt, some uncertainty in execution risk in actually achieving the cost savings that they're claiming. But they already have a big market share in helping banks process credit card transactions, help service auto loans for banks. This also gives them the No. 1 market share in payment processing worldwide, which in my mind is a really nice business combination going into this cashless society over the next decade or two.
Moser: All right. I'm going to go with another company that we cover a lot of here -- a couple of companies, really, that have made a little bit of news here. I called out MercadoLibre a couple of weeks ago. This week, I'm going to go with PayPal. If anybody out there was following the news, they would have seen that MercadoLibre recently raised close to $2 billion in equity offerings here, which on its own is impressive. I think that was a good move. They took advantage of the share price being nice and high at this point in time.
The neat thing was that PayPal invested $750 million in MercadoLibre. That, to me, is telling from a number of angles. First and foremost, we talk about MercadoLibre as more than just an e-commerce company. It is certainly a payments company as well. We saw this most recent quarter, their platform, Mercado Pago, is processing a lot of dollars through that network. Granted, when you compare it to something like PayPal, it's a drop in the bucket. But you have to start somewhere. It's nice to see that PayPal and MercadoLibre are partnering up there. It's always interesting to me to think about how so long ago, there was this connection between MercadoLibre and eBay, and we know that PayPal came from eBay, and now there is no connection between eBay and MercadoLibre, but there's now a connection between PayPal and MercadoLibre.
All to say, you probably want to invest in PayPal and MercadoLibre and just leave eBay alone. Anyway, I think it's just a neat angle there with PayPal. Good to see that they're investing in that global payments network, and good to see MercadoLibre taking advantage of it.
