On Wednesday, PayPal Holdings Inc . (NASDAQ:PYPL) stock received an optimistic outlook from Bernstein, as the firm upgraded it from Market Perform to Outperform, with an increased price target set at $78, up from the previous $71. The upgrade comes after nearly three years of the payment giant holding a Market Perform rating.
Bernstein cited several factors contributing to PayPal's improved prospects, including positive growth in branded transactions, successful pricing initiatives by its payment processor subsidiary Braintree, and effective monetization strategies for its mobile payment service, Venmo. These elements have led to a stronger gross profit performance for PayPal.
The firm also highlighted the impact of PayPal's new management team, which is expected to sustain gross profit growth at mid-single-digit levels despite competitive challenges. PayPal's strategic position in the e-commerce and digital commerce sectors was noted as an additional strength, offering multiple avenues for growth.
The valuation of PayPal was deemed attractive by Bernstein, with the stock trading at approximately 14 times the projected 2025 earnings, for a company that is anticipated to grow earnings per share at a low double-digit to teens rate. PayPal's robust balance sheet, boasting $14 billion in cash and substantial free cash flow generation, was also mentioned as a key positive factor.
While recognizing the uncertainties in the broader economic environment, Bernstein suggested that PayPal is more likely to consistently outperform expectations and revise future earnings estimates upward in the subsequent quarters. The new price target implies a potential 22% upside from current levels.
In other recent news, PayPal Holdings Inc. has reported remarkable financial results for the second quarter of 2024. The company's total payment volume increased by 11%, reaching $417 billion, while revenue grew by 9% on a currency-neutral basis. Additionally, non-GAAP earnings per share saw a significant 36% rise year-over-year, leading PayPal to raise its full-year guidance for transaction margin dollars and earnings per share.
The company'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. Furthermore, PayPal generated $1.4 billion in free cash flow and completed $1.5 billion in share repurchases.
PayPal has raised its full-year profit and free cash flow guidance for 2024. The company is planning to launch more NFC technology options in Europe but expects a decline in interest income in the second half of the year. Despite this, PayPal is increasing its marketing spend for product launches and brand campaigns. These are the key recent developments for the company.
InvestingPro Insights
In light of the recent upgrade of PayPal Holdings Inc. (NASDAQ:PYPL) by Bernstein, it's noteworthy to mention some key metrics and insights from InvestingPro. The company's aggressive share buyback strategy, as highlighted by an InvestingPro Tip, suggests a strong belief from management in the company's value. Additionally, with 20 analysts revising their earnings upwards for the upcoming period and the stock trading at a low P/E ratio relative to near-term earnings growth, investors might see these as signals of potential upside.
From a financial perspective, PayPal's market cap stands at $66.95 billion, with a forward-looking P/E ratio of 14.26. The company has shown a revenue growth of 8.66% over the last twelve months as of Q2 2024, which aligns with the positive growth trajectory highlighted by Bernstein. Moreover, PayPal's significant return over the last week of 10.21% is an indicator of recent investor confidence.
For those seeking more in-depth analysis and additional insights on PayPal, there are more InvestingPro Tips available, including the company's position as a prominent player in the Financial Services industry and the prediction of profitability for this year. To access these insights, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. The InvestingPro platform lists a total of 7 additional tips for PayPal Holdings Inc., which could further inform investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.