KBW Starts PayPal At Outperform, Competition Won't Become 'Menacing' For A While

In a report published Wednesday, Keefe, Bruyette & Woods analyst Sanjay Sakhrani initiated coverage of

with an Outperform rating and a price target of $43. Analyst Sanjay Sakhrani believes that PayPal is poised to capitalize on e-commerce growth and internet mobile proliferation and has the ability to expand its value to merchants and consumers through expanded credit offerings. In the report Keefe, Bruyette & Woods pointed out that the company was the only "real global digital wallet of scale," and had significant growth opportunity as it helps to tie fragmented markets and achieve global operability. "We think M&A optionality is a meaningful avenue through which the company can execute on both strategically and financially (long-term) and there is also the optionality for additional upside should a large player look at PayPal as an acquisition target," Sakhrani wrote. Sakhrani added that PayPal's near- to intermediate-term growth story was "one in which the company can excel relatively trouble free" since competition "will likely take some time to spool up to a menacing level." PayPal needs to develop and adopt strategies that help it to maintain its market-leader position, Sakhrani believes.