PayPal’s (PYPL) total payment volumes could rise 6% if Amazon (AMZN) decides to allow the online payment system to be used on its website, research firm Craig-Hallum wrote today. Given this opportunity, investors should buy PayPal following the recent weakness in its stock, the firm stated.

BLOOMBERG REPORT: On January 27, PayPal’s CEO said that his company was in talks with Amazon about accepting PayPal as a payment method, Bloomberg reported.

AMAZON’S INCENTIVES: There are a few reasons why Amazon would want to begin accepting PayPal, wrote Craig-Hallum analyst Brad Berning. Specifically, customers who carry out cross-border transactions would feel more secure using PayPal than typing in their credit card numbers. PayPal has nearly 200M customers, half of whom are outside the U.S., the analyst stated. Also, PayPal has a “proven track record” of increasing merchants’ sales, and PayPal gives Amazon access to additional funds, according to Berning.

PAYPAL’S OPPORTUNITY: By reaching a deal with Amazon, PayPal could obtain about $25B in additional payment volumes, which translates into a 6% increase, Berning wrote.

PRICE ACTION: In late morning trading, PayPal rose 1% to $40.12 per share. Prior to today’s advance, PayPal shares had slid by about 4% over the last month of trading.

 

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