PayPal Holdings Inc. fell as much as 1.9 per cent early Thursday after the payments company said it will acquire online coupon site Honey Science Corp. for about US$4 billion, its largest-ever acquisition. Some analysts praised the deal’s strategy and growth potential, but others flagged the steep price and wondered whether Honey was the best M&A target for PayPal.

Here’s a sample of the latest commentary:

SunTrust, Andrew Jeffrey

Jeffrey in a note recommended that investors stay on the sidelines as “this is not the deal PayPal needs to secure its position among premium valued network stocks.”

Instead, SunTrust views Honey as a “sort of ‘shoot-the-moon’ attempt to more deeply entrench PayPal in the consumer e-commerce experience while also bolstering its merchant value proposition. Unfortunately for investors, the company is paying a large premium, in our opinion, for an unproven solution which does little to advance its ability to monetize beyond e-commerce.”

Though PayPal can probably “elegantly integrate Honey into its core app and Venmo,” it may not “significantly advance the company’s market share amid rising competition,” he said. The deal also “does nothing to extend PayPal’s physical world reach, where 85 per cent-plus of all transaction volume occurs.” Jeffrey did flag one positive: Honey is a small acquisition relative to PayPal’s market cap, which may limit downside risk. He rates shares hold, with a price target of $105.

Raymond James, John Davis

“While the strategic rationale makes a great deal of sense as it touches both the consumer and merchant side of PayPal’s platform and the cross sell opportunities are significant, it certainly didn’t come cheap,” Davis wrote. “Any way you slice it, $4 billion is a lot to pay for a company making little to no money.” Rates shares outperform, with a target price of $122.

MoffettNathanson, Lisa Ellis

The acquisition is “strategically attractive” for PayPal, as it’s imperative for the firm to strengthen its network by enhancing merchant and consumer value propositions as the “wallet wars” wage on, Ellis wrote in a note.

Buying Honey is “well aligned with this critical strategic priority,” as Honey’s tools will strengthen PayPal’s suite of merchant services while integrating Honey’s services into PayPal and Venmo apps will boost consumer engagement, she said.

Ellis views the $4 billion price as “consistent with comps for other small, high growth firms in payments and tech,” like PayPal’s iZettle deal. She rates shares buy, with a target price of $135.

BofA, Jason Kupferberg

Kupferberg views the deal as “strategically compelling” as PayPal can leverage the high-growth asset to “generate meaningful revenue synergies over time.” That’s even as the $4 billion value “represents a steep revenue multiple,” he said.

The purchase also “represents a new breed of acquisition,” he added, as PayPal has in the past mostly acquired payments companies but now seeks to go “deeper into the e-commerce ecosystem by moving up to the front-end of the shopping experience as opposed to being on the back-end at checkout.” He flagged that Honey is working with 30,000 merchants including Expedia, Macy’s, Priceline and Sephora.

Kupferberg expects PayPal will update its outlook on its fourth-quarter earnings call in January to include Honey. He doesn’t see the proposed deal changing the company’s capital allocation policy, as PayPal “has the balance sheet flexibility for continued share repurchases and additional M&A.” Keeps buy rating, target $127.