Well into Q3 earnings season, one defining characteristic appears to be coming to the fore. Some companies are reporting excellent results, yet the macro elements have led many to present conservative forward estimates.
PayPal (PYPL) is the latest example. The digital payment giant just delivered the strongest quarterly growth in its history. Specifically, the company delivered record revenue of $5.46 billion, up 25% year-over-year and beating the estimates by $50 million. PayPal delivered a bottom line beat, too, with Non-GAAP EPS of $1.07 coming in ahead of the Street’s forecast by $0.13.
However, the company expects Q4 non-GAAP EPS growth to decline from the 41% growth rate it exhibited in Q3 to 17%-18% in Q4. This will result in non-GAAP EPS of $0.97 to $0.98, below consensus estimate of $1.07.
For Rosenblatt analyst Sean Horgan, however, PayPal was a “top pick into earnings” and the company duly delivered. The “near term headwinds” might need to be factored in, but the analyst tells investors to do what seasoned pros are likely to do when presented with unexpected favorable circumstances.
“We believe the initial selloff is a knee-jerk reaction and will be short-lived, creating a tactical buying opportunity in the near-term and a more attractive entry point for the long term,” Horgan said. “The downside case is that eBay and credit headwinds are driving downside risk to 4Q and 2021 EPS. While true, we see the macro backdrop supporting PYPL’s core business. Coming out of today’s 3Q report we remain optimistic about shares of PYPL and are buyers of the stock at current levels.”
Horgan’s Buy rating, though, is accompanied by a reduced price target. The figure drops from $280 to $250. That said, the new target still represents healthy upside of 38.5%. (To watch Horgan’s track record, click here)
There’s similar sentiment across the Street. Barring 1 Hold, all other current ratings – 15, as it happens – say Buy. The Strong Buy consensus rating is backed by a $228.31 average price target, implying upside of 22% in the coming months. (See PayPal stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
