PayPal Continues To Benefit As It Transitions From Being A Payment 'Button'

Paypal Holdings Inc PYPL reported its 1Q results, with the top and bottom lines ahead of the consensus, the 2Q and 2016 guidance most in-line with expectations and the company having bought back 17 million shares worth $600 million.

Robert S. Peck of SunTrust Robinson Humphrey maintained a Buy rating on the company, with a price target of $44.

“Our Buy rating is predicated on multiple modest growth drivers like Braintree, Venmo, Xoom, merchant adds, Credit, Paydiant, cost rationalization, and buybacks,” Peck mentioned.

Robust Results

For 1Q, PayPal reported 184 million active accounts, with more than 170 million buyers and over 14 million merchants on its network.

The number of transactions continued to grow, driven by higher engagement, while TPV also accelerated.

On the other hand, “transaction take rate continued to decline on mix shift to large merchants, Braintree, and Venmo,” the analyst stated, while adding, “Other revs accelerated 7-pts on credit products and amended Symphony agreement.”

Revenue growth at 23 percent was the highest in the past five quarters, while non-GAAP operating margins declines 70 bps due to the Xoom acquisition.

By the end of 1Q, PayPal had $1.4 billion of the total share buyback authorization of $2 billion still remaining.

Guidance

Peck believes that “PayPal continues to benefit from strong network effects as it transitions from a payment "button" to providing end-to-end payment solutions.”

The company maintained its revenue and EPS guidance for 2016, in-line with the consensus forecasts.