PayPal Expected To Deliver A Strong Q3, But Guidance Will Be The Focus

Paypal Holdings Inc PYPL would likely report solid Q3 results, backed by continued market share gains, Barclays’ Darrin D. Peller said in a report. He added, however, that focus should be on guidance, since management had held back from providing any medium-term projections on the previous call.

Analyst Peller maintained an Overweight rating on PayPal, while raising the price target from $42 to $47.

Q3 Preview

PayPal is likely to have continued to gain market share during the quarter, driven by exceptional growth in mobile and a strong positioning across numerous verticals. Mobile is expected to record 56 percent y/y growth, accounting for 28 percent of [Total Portfolio Value].

“Management sees an opportunity to drive substantial leverage within various cost lines, citing cost efficiencies within operations and noted that even with “hands off the steering wheel” PYPL would see margin expansion given its scale,” Peller wrote. He expects PayPal’s core margins to have expanded by at least 100bps.

Guidance In Focus

Management had held back from announcing medium-term guidance, as they wanted to see how the potential deals with Visa Inc V and Mastercard Inc MA would play out. “The company continues to be in talks with several issuers and management appears confident that any deals reached would be a net positive for PayPal,” Peller pointed out.

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