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PayPal: Laying Out the Bull-Case
Stock Analysis & Ideas

PayPal: Laying Out the Bull-Case

Thing have gone a bit pear-shaped at PayPal (PYPL). On top of the negative macro developments and market rotation, over the past couple of quarters, the digital payments giant has exhibited slowing growth and has lowered expectations. The result has been a loss of confidence amongst investors. To wit, shares are down 44% year-to-date.

Deutsche Bank’s Bryan Keane recently met with some of the company’s top brass to talk through its game plan to “drive higher engagement, ARPU, and market share gains.”

“Besides inflation, supply chain issues, and the Russia/Ukraine conflict adding to the unpredictability,” said the 5-star analyst, “CFO and EVP of Global Customer Operations John Rainey remains confident that Pypl will continue to take share and grow faster than the eComm market.”

That’s not unprecedented. Past performance shows PayPal has grown faster than the overall market and the company expects that to continue, with its mid-term guidance calling on average for ~1-1.5ppts increased eComm penetration annually.

On another front, excluding eBay, engagement has been increasing at a rate of high teens to 20% and the company has a host of opportunities in store to “drive engagement.”

“For example,” say Keane, “PYPL has a long run way of switching desktop users over to the digital wallet where they have 2x the LTV due to better product attach rates and engagement.”

Further boosting engagement are crypto users, who check their wallet balances each day, while the company also sees a 21% “halo effect” from BNPL (buy now, pay later) with the halo effect on the rise since the product’s launch.

Then there’s the company’s payment gateway service platform Braintree, which is turning out to be a “diamond in the rough,” and exhibiting just as fast or even faster growth than rivals given the “value proposition” of its +400m accounts.

So, it looks like PayPal is working on regaining its footing, but what does this all mean for investors? Keane rates PYPL a Buy rating and keeps a $200 price target for the shares, suggesting room for 89% growth over the coming year. (To watch Keane’s track record, click here)

Turning now to the rest of the Street, where PYPL stock has a Moderate Buy consensus rating, based on 26 Buys, 10 Holds and 1 Sell. Shares could be changing hands for a 73% premium a year from now, considering the average price target clocks in at $182.36. (See PayPal stock forecast 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.

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