BTIG Says PayPal Remains Undervalued

Shares of Paypal Holdings Inc PYPL have gained nearly 25 percent over the past year and 45 percent since December, but BTIG says the stock remains undervalued.

The Analyst

BTIG's Mark Palmer maintains a Buy rating on PayPal with a price target lifted from $114 to $130.

The Thesis

PayPal's stock has room to continue appreciating, Palmer said in a research report. A few reasons for this include:

• Venmo's growth is the "biggest swing factor" in determining PayPal's valuation. Total payment volume grew 73 percent year-over-year in the first quarter to $21 billion with 40 million users and a revenue run-rate of more than $300 million.
• PayPal's $809 million in free cash flow in the first quarter will help finance investments in increasing customer engagement with enough left over for share repurchases.
• PayPal continues to build on its large scale that its competitors can't match. The company ended the first quarter with 9.3 million net new active accounts to bring its total to 277 million.
• Management has shown "significant recent progress" in its global expansion.
• PayPal's acquisition of iZettle in 2018 will help in gaining market share within the in-store payment space.
• Investments in blockchain and artificial intelligence represent a new source of optionality, which isn't reflected in PayPal's valuation at current levels.
• Recent moves to divest $7.6 billion worth of credit receivables supports a "fuller multiple" for the stock as it lowers direct credit risk.

Price Action

Shares of PayPal were trading lower by 1.5 percent to $110.38 Monday afternoon.

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