Wells Fargo Says Buy The PayPal Dip

PayPal Holdings Inc PYPL took a major hit after the company announced it would no longer be the primary payment processor for eBay Inc EBAY starting in 2021. But one Wall Street analyst said the eBay sell-off has provided an excellent buying opportunity for PayPal investors.

The Analyst

Wells Fargo analyst Timothy Willi has upgraded PayPal from Market Perform to Outperform and raised the price target from $80 to $95.

The Thesis

Long-term positive trends in global e-commerce growth coupled with PayPal’s enviable position in the payments market are much more important for long-term investors than the eBay relationship, Willi said in a Monday note. (See the analyst's track record here.) 

While PayPal shares might appear "somewhat expensive" in the near-term through the lens of traditional valuation metrics, theshares are reasonably priced versus transaction processing peers, the analyst said. 

Wells Fargo predicts strong earnings growth from PayPal in coming years.

PayPal is staying on as a branded payment option for eBay, and Willi said he expects eBay will continue to be a major revenue contributor even beyond 2021. PayPal will likely remain on as a branded eBay payment option indefinitely and represent more than half of eBay’s checkout share, he said. 

"Under this scenario, we see a low- to mid-single-digit EPS impact during 2021." 

Price Action

PayPal shares were down 0.43 percent at $76.24 at the time of publication Monday afternoon. 

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Photo courtesy of PayPal.