Look For A Steady Quarter From PayPal, Credit Suisse Says

Credit Suisse analyst Paul Condra expects a steady Q2 from PayPal Holdings Inc PYPL, when the company reports earnings on July 26.

“We expect PayPal to deliver a steady in-line quarter with the potential for slight upside to numbers. We believe margin expansion could be positive for the stock, as this has been a bit of a controversy on the name,” he said.

Condra maintained his Outperform rating with a $56 price target on PayPal.

A Potential Asset Light Strategy Announcement?

Condra sees this as a possibility, but the impact it could have on the stock is unknown.

“On the one hand, we expect the market would take a positive view of PayPal’s ability to deliver on its intentions and may see this as another step toward possible M&A to the extent it frees up cash. On the other hand, asset light could have a near term negative impact to margins, which could drive volatility in the stock,” he said.

Overall, as a long as there is no major announcement on July 26, Condra expects the earnings call to result in level trading for PayPal. Growths catalysts like Venmo could push the stock higher.

PayPal traded over 3 percent higher Wednesday morning after Apple Inc. AAPL announced a new partnership with PayPal.

Condra’s Estimates

“We expect only modest upside to guidance, but believe stock appreciation could be driven by multiple-expansion and/or accretive acquisitions. We forecast 2Q17 EPS of $0.42 vs Consensus $0.43; 2017 EPS of $1.78 in line with consensus and guidance of $1.74-$1.79. We forecast 2Q17 revenue of $3.07b in line with consensus vs. guidance of $3.05b-$3.1b.”

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