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Analyst Sees 'Fundamental Opportunities To Accelerate Growth, Expand Margins' At PayPal

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In a report published Friday, Susquehanna analyst James E Friedman maintained a Positive rating on eBay Inc (NASDAQ: EBAY), with a price target of $75, saying that PayPal seems poised to take market share.

PayPal seems to have "fundamental opportunities to accelerate growth and expand margins," analyst James E Friedman said.

PayPal addresses the online and mobile payments market, which is estimated at $2.5 trillion. However, the management is targeting new opportunities in Money Transfer (with Venmo), P2P Lending (with PayPal Credit), P2P Payments and SMB Lending. These incremental opportunities expand the size of PayPal's addressable market to $25 trillion.

In the report Susquehanna noted, "Schulman emphasized that PayPal Credit turns an expense into a revenue stream and is part of the flywheel of their financial services. PayPal Credit increases both transaction size and frequency. And when a customer funds a transaction with PayPal credit, it eliminates the interchange fee (called transaction fees, which are currently 27% of overall PayPal revenue)."

If PayPal Credit increased by around $3 bln, it could add 12 cents to PayPal's EPS and boost margins by 200bps. "Schulman discussed the frequency of use of Venmo accounts, which is running 2-3x transactions/week ($1.3 bln of Q1 volumes). This is sharply more than the 2-3x per month at PayPal," Friedman stated.

Latest Ratings for EBAY

DateFirmActionFromTo
Jan 2017Aegis CapitalInitiates Coverage OnBuy
Oct 2016Hilliard LyonsUpgradesLong-Term BuyBuy
Oct 2016WedbushMaintainsNeutralNeutral

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Posted-In: SusquehannaAnalyst Color Reiteration Analyst Ratings

 

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