PayPal Scores Q2 Beat, Analyst Sees More Improvements Ahead

Despite being up over 50 percent on the year, Credit Suisse analyst Paul Condra still sees an opportunity to cash in Paypal Holdings Inc PYPL. Condra maintains his Outperform rating and raised his price target from $56 to $63.

“We were encouraged by continued strong volume growth and user metrics and believe the magnitude of the EPS beat and raise was likely in line to slightly better than expected. We expect this to overshadow negatives, which included transaction expense higher than we modeled, take rate lower and GAAP-based operating margins compressing 30bps y/y,” he wrote.

What To Expect From PayPal Going Forward

Condra highlighted how PayPal continues to help drive user engagement and form key partnerships that help drive upside.

“We expect improving engagement and user trends along with continued partnership announcements to be the main attraction as this underpins the expanding stickiness and entrenchment of the platform,” he said.

The latest partnerships announced on the call were with Bank of America and Baidu. While specific details on the deals are not disclosed, Condra believes “the continued expansion of the partner distribution network bodes well for customer acquisition costs and continued volume growth.”

2 Key Takeaways From The Earnings Call

• 1. The monetization of Venmo will soon move out of the pilot phase and scale across PayPal’s merchant network.
  2. Asset-light remains on track, but Condra came away from the call believing a deal might take longer than initially expected (possibly next year).

Shares of PayPal were trading up 3.25 percent during Thursday’s pre-market session. To take a deeper look into PayPal’s earnings report and read the latest financial news, visit Benzinga Pro.