PayPal shareholders have been on a wild ride over the last five years. The digital payment giant’s stock peaked in the aftermath of the pandemic, hitting the $310 threshold in July 2021 after its price nearly tripled in the span of three years. Shares then shed those gains and more, however, approaching the $50 mark in late October of last year before gaining 80% since.
Despite the recent volatility, Bank of America is optimistic about the company’s immediate future under CEO Alex Chriss, who replaced longtime chief executive Dan Schulman last September. The team, led by senior analyst Jason Kupferberg, said the company’s turnaround is showing increased progress, warranting a higher valuation multiple. With the stock trading around the $90 mark Monday afternoon, the analysts raised their price target to $103 from $86.
The stock’s median price target currently sits at $91, in between a high of $125 and a low of $70, per estimates from S&P Capital IQ. According to data from Bloomberg, just over half of the Street considers the stock a buy.
Plenty of positive catalysts ahead for PayPal, BofA says
BofA said potential acceleration next year in the company’s most important metric—total payments growth, or TP—helped fuel their bull case. They also noted the encouraging e-commerce spending data for holiday shopping thus far and said they didn’t believe the prospect of modest improvement in total payment volume, also known as TPV, was already priced into the stock.
“Feb. Investor Day could also be a positive catalyst,” they wrote in a note Monday, “and we expect ample [free cash flow] generation & share buyback to persist.”
Analysts have revised their estimates for TPV this quarter down almost one percentage point since the end of the Q3, according to Visible Alpha. Expectations are up nearly 6% for diluted operating EPS, however. That number came in at $1.43 last quarter, representing a more than 12% beat.
BofA said the company could also exceed estimates for the all-important TP number when Q4 results are released, citing the new management team’s track record of conservatism.
The analysts noted the Street is divided about how PayPal’s main business will continue to perform amid a crowded landscape. The company’s so-called “core button,” which allows customers to make payments directly on websites using PayPal, competes not just against other digital wallets but also the ability of users to save their credit and debit card credentials in browsers.
BofA noted additional potential headwinds such as decreasing volumes for its end-to-end payment service for businesses, called “Braintree,” as well as the implementation of global minimum taxation, a framework known as Pillar Two.
Still, BofA sees the stock as an attractive buy at its current price. Shares currently trade at 19 times forward earnings, per Cap IQ, making the stock relatively cheaper than that of credit card giants Visa (28 times) and Mastercard (34 times), not to mention digital payment competitor Block (24 times).