SunTrust Initiates PayPal At Buy; What Else Are Analysts Saying?

In a report published Monday, SunTrust Robinson Humphrey analyst Bob Peck initiated coverage of Paypal Holdings Inc PYPL with a Buy rating and $45 price target, noting that the "leading enabler" of online and in-app payments has "ample capacity" to fund its future growth.

According to Peck, PayPal's $6 billion in cash ($2 billion U.S.) and capacity to raise a further $5 billion in debt without altering its investment grade rating offers the company flexibility to pursue inorganic growth initiatives. The analyst noted that inorganic growth (per management) is "core to the growth strategy" and the company could either acquire a global processor (and expand to the in-store market) or invest in P2P payments, P2P lending, SMB lending, and loyalty/rewards initiates. Finally, PayPal's "independence" from eBay should allow the company to pursue merchants and marketplaces that are competitive with eBay.

See Also: Pair Trade? Bob Peck Starts PayPal At Buy, Maintains Neutral On eBay

Peck continued that PayPal's total addressable market of B2C e-commerce is at least $45 billion while a "total stretch" total addressable market (including B2C, remittance, B2B, in-store) could be around $500 billion. The company boasts 165 million active users (10 million of which are merchants), operates in 200 countries and counts a support staff of 8,000. The company is also "highly credible" as it relates to international (48 percent of total payment volume), cross-border (24 percent of total payment volume), and global security and regulatory compliance.

JMP: ‘One Of The More Exciting Stories'

Tien-tsin Huang initiated coverage of PayPal with an Overweight rating and $48 price target.

According to Huang, PayPal remains "one of the more exciting stories" within his payment processing coverage space. The analyst added that the company's compelling profile is due to its: 1) mid-teen organic revenue growth (more than 40 percent faster than the broader space), 2) a "high relative exposure" to the digital commerce space which is one of the "fastest growing" areas in payments, and 3) a "strategic value" based on its "strong brand and global scale."

What Else Is The Street Saying?

• Analysts at Evercore ISI initiated coverage with a New Sell rating and $36 price target.
• Analysts at Wells Fargo initiated coverage with an Outperform rating.
• Analysts at BMO Capital Markets initiated coverage with an Outperform rating and $46 price target.
• Analysts at Robert Blair initiated coverage with an Outperform rating and $45 price target.