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Investing in PayPal Will Pay Off, Says Analyst
Stock Analysis & Ideas

Investing in PayPal Will Pay Off, Says Analyst

Shares of PayPal Holdings (NASDAQ: PYPL) have not fared well this year and have cratered 47.5% year-to-date. Currently, the stock is hovering just above its 52-week low of $92.25 and closed at $102.31 on April 14.

The reason for investors turning away from the stock has been that the company has been unable to sustain the huge growth seen during the height of the pandemic. To add to the digital payment company’s woes, earlier this week, PYPL announced the departure of CFO and EVP of Global Customer Operations, John Rainey.

While PayPal will continue its search for a permanent replacement, current SVP of corporate finance and IR Gabrielle Rabinovitch will become interim CFO. Aaron Karczmer, who presently leads Risk, Platform Services, and Legal will become the EVP of Global Customer Operations.

Considering the recent management changes and citing new data, Wells Fargo analyst Donald Fandetti is “cautious” about PayPal’s Q1 with the company expected to announce its Q1 earnings on  April 27.

The data that Fandetti is referring to is PYPL’s combined Daily Active Users (DAUs) data from PayPal and Venmo using Apptopia. This data indicated that the company’s DAUs were 36.8 million in Q1, up only 1% quarter-over-quarter and 9% year-over-year.

The top-rated analyst thinks that this will leave “little ‘wiggle room for PYPL on engagement, which we think needs to strengthen materially for PYPL to meet its revenue guide of ~$6.4B in 1Q.”

Indeed, PayPal’s management had highlighted the need for more user engagement back in March and intends to drive this user engagement by building its market share when it comes to online checkout and engaging more users within its digital wallet. The company’s other key strategic growth initiatives include “continuing to expand Venmo into commerce; expanding in-store; and focusing on international opportunities.”

Fandetti believes that based on the DAU data, PYPL’s revenues in Q1 are likely to come in below consensus estimates, and CFO Rainey’s exit from the company is likely to “cloud the story” for PYPL over the near term.

However, the analyst continued to be bullish on the stock with a Buy rating as he is of the view that the stock is likely to go up as “PayPal executes strongly against its key strategic initiatives” and the company could give a “solid” financial performance in the second half of the year.

Fandetti has a price target of $152 on the stock, implying an upside potential of 48.6% at current levels.

Wall Street’s Take

The rest of the analysts on the Street, however, are cautiously optimistic with a Moderate Buy consensus rating based on 29 Buys, 10 Holds, and one Sell. The average PYPL stock forecast is $174.86, implying an upside potential of 70.9% from current levels.

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