On Wednesday, PayPal Holdings Inc . (NASDAQ:PYPL) saw its price target raised to $70.00 from $68.00 by TD Cowen, while the firm retained a Hold rating on the stock. The increase reflects a positive view of the company's recent performance under new management, which has been meeting financial targets and demonstrating improved urgency and product development.
The analyst highlighted that PayPal's branded checkout stabilization and the execution of Braintree's pricing strategy were particularly encouraging aspects of the company's performance. These factors contributed to PayPal's strong showing in the second quarter.
Despite these positive developments, the analyst noted that other factors contributing to PayPal's outperformance, such as interest and transaction loss/credit loss (TL/CL), could be considered more temporary in nature. Therefore, PayPal is still seen as a 'show-me' story, indicating that investors may be looking for more sustained proof of the company's growth and operational efficiency.
The second quarter results were seen as broadly positive, signaling that the new management is not only meeting financial goals but also bringing a greater sense of urgency and speed to product execution. This assessment suggests that PayPal is on a promising trajectory, although the market is yet to be fully convinced of its long-term prospects.
The revised price target of $70.00 reflects a modest increase, indicating that while the analyst acknowledges the positive steps taken by PayPal, the current recommendation for investors remains unchanged at Hold. This suggests that while the company is moving in the right direction, it may still have some way to go to warrant a more bullish stance from the firm.
In other recent news, PayPal Holdings Inc. demonstrated significant financial growth in its second quarter earnings report. The company's total payment volume increased by 11%, reaching a substantial $417 billion, while revenue grew by 9% on a currency-neutral basis. Non-GAAP earnings per share saw a remarkable 36% rise year-over-year, leading PayPal to raise its full-year guidance for transaction margin dollars and earnings per share.
Following these results, BMO Capital revised its earnings per share (EPS) estimates for the company upwards by 7-9%, leading to an increased price target for PayPal. Similarly, JPMorgan maintained its Overweight rating on PayPal, expressing optimism about the company's direction towards fostering profitable revenue growth. Bernstein also upgraded PayPal's stock from Market Perform to Outperform, citing positive growth in branded transactions and successful pricing initiatives by Braintree.
PayPal's strategic investments are being directed towards initiatives like branded checkout, Braintree, Venmo, and the PayPal Commerce Platform. Venmo's total payment volume surpassed $73 billion, with nearly 62 million monthly active users.
Despite expecting a decline in interest income in the second half of the year, PayPal is increasing its marketing spend for product launches and brand campaigns. These are the recent developments for the company.
InvestingPro Insights
PayPal Holdings Inc. (NASDAQ:PYPL) has been showing signs of a strong operational turnaround under its new management, as reflected in its recent performance. Contributing to this positive outlook, InvestingPro Tips highlight that management has been actively buying back shares and analysts have revised their earnings upwards for the upcoming period, signaling confidence in the company's future. Furthermore, PayPal is trading at a low P/E ratio relative to near-term earnings growth, suggesting that the stock may be undervalued considering its earnings potential.
Looking at real-time metrics from InvestingPro, PayPal's market capitalization stands at $69.68 billion, with a P/E ratio of 16.1, which adjusts to 16.53 when looking at the last twelve months as of Q2 2024. The PEG ratio for the same period is at 0.99, indicating a balance between the stock price and expected earnings growth, while the company's revenue growth has been steady at 8.66% over the last twelve months. These figures underscore PayPal's solid financial footing and growth trajectory.
For investors keen on digging deeper into PayPal's financial health and future prospects, InvestingPro offers additional insights and metrics. To access these, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. There are 6 more InvestingPro Tips available for PayPal, which can provide further guidance for those considering an investment in the company.
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