On Monday, Mizuho Securities adjusted its outlook on PayPal Holdings Inc (NASDAQ:PYPL), raising the price target from the previous $90.00 to $100.00, while reaffirming its Outperform rating on the stock. The firm's analysis suggests that concerns over the potential loss of market share for PayPal's branded checkout button are exaggerated.
The reassessment by Mizuho is based on a comparison between PayPal's growth and that of its major merchant partners. The evaluation of online sales growth at 14 of PayPal's largest branded checkout partners, which include well-known names such as Etsy (NASDAQ:ETSY), Nike (NYSE:NKE), and Airbnb, revealed that PayPal's Last Twelve Months (LTM) branded Total Payment Volume (TPV) has been growing at a rate that is either in line with or faster than 9 out of the 14 partners.
The analyst from Mizuho believes that PayPal's performance justifies a higher trading multiple, suggesting an increase from 17 times to 18 times. This adjustment is supported by the observation that PayPal's branded TPV increased by 6%, which matches the average online sales growth of 6% among key merchant partners.
In addition to the price target change, Mizuho has also modestly raised its medium-term estimates for PayPal. The positive outlook reflects confidence in the company's ability to maintain its growth trajectory in the competitive digital payments landscape.
The revised price target of $100 represents Mizuho's expectation for PayPal's stock value, underlining the firm's optimistic view of the company's future financial performance. The continued Outperform rating indicates that Mizuho anticipates PayPal's stock to perform better than the broader market in the foreseeable future.
In other recent news, PayPal Holdings has expanded its cryptocurrency services to U.S. business accounts, allowing merchants to buy, hold, and sell various cryptocurrencies. This move is part of PayPal's broader efforts to integrate digital currencies into its platform. Additionally, PayPal has reported an 11% increase in total payment volume and a 9% rise in revenue on a currency-neutral basis in its recent earnings. Non-GAAP earnings per share also saw a substantial 36% year-over-year increase. However, the company is expected to reduce its global workforce by 9%, equating to approximately 2,500 jobs.
In terms of strategic partnerships, PayPal has integrated with Amazon (NASDAQ:AMZN)'s 'Buy with Prime' service and collaborated with Adyen (AS:ADYEN) to introduce Fastlane, a feature designed to streamline online transactions. Analyst firms have provided mixed feedback on PayPal's performance and future prospects. While Deutsche Bank and Mizuho have upgraded the stock, highlighting the company's potential for continued growth, Goldman Sachs, Jefferies, and BMO Capital have maintained their neutral positions.
InvestingPro Insights
PayPal's recent performance aligns with Mizuho's optimistic outlook, as reflected in the latest InvestingPro data. The company's market cap stands at $82.39 billion, with a P/E ratio of 19.44, indicating investor confidence in its earnings potential. PayPal's revenue growth of 8.66% over the last twelve months and 8.21% in the most recent quarter supports Mizuho's assessment of the company's ability to maintain growth in the competitive digital payments landscape.
InvestingPro Tips highlight PayPal's strong recent performance, with the stock showing robust returns over the last month (14.85%) and three months (33.58%). This aligns with Mizuho's decision to raise the price target and reaffirm the Outperform rating. Additionally, PayPal is trading near its 52-week high, with its current price at 98.3% of the 52-week peak, further supporting the positive sentiment.
For investors seeking a deeper understanding of PayPal's financial health and market position, InvestingPro offers 6 additional tips, providing a comprehensive analysis to inform investment decisions.
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