Market Overview

Jefferies: PayPal Is More Than A Payments Company

Related PYPL
Fundbox Announces Venmo-Like Small Business Payment Platform
Alphabet Shares Rise On Google Pay Debut: Should Apple Be Worried?

Jason Kupferberg at Jefferies initiated Paypal Holdings Inc (NASDAQ: PYPL) with a Buy rating and a $44 price target, a 20 percent premium to Monday's closing price of $36.39.

Kupferberg said that the "scarcity value of the stock […] will command a higher multiple," particularly since the company is a "worldwide leader in social/mobile money movement." Though a value of 21x 2017 P/E multiple "doesn't look cheap," the company should trade as a "hybrid of a payments stock and an Internet stock," justifying a rich value.

Jefferies acknowledges the bear case against PayPal, notably that the company is in a competitive space with players like Alibaba Group Holding Ltd (NYSE: BABA),, Inc. (NASDAQ: AMZN), Visa Inc (NYSE: V) and Mastercard Inc (NYSE: MA). Kupferberg said that while PayPal's business "model" and "moat" is not as strong as Visa or Mastercard, it is a "scarce investment opportunity."

There's also the giant in the room: Apple Inc. (NASDAQ: AAPL). Kupferberg said that while the firm is not "dismissive of the long-term threat potential" from Apple, it does not see the company as a "near-term threat."

Jefferies pointed to the fact that PayPal has a strong, "leveragable" balance sheet with roughly $6 billion in cash. That strong balance sheet will help the company drive M&A, potentially adding to its recent acquisitions of Braintree, Paydiant and XOOM. That M&A will "help the company drive increased user engagement over time."

PayPal was trading 1.4 percent higher in pre-market activity after falling 10 percent since the company was first spun off. The company hit a high of $42.55 on its first day of trading.

Latest Ratings for PYPL

Feb 2018Credit SuisseMaintainsOutperformOutperform
Feb 2018Wells FargoUpgradesMarket PerformOutperform
Feb 2018BMO CapitalMaintainsOutperformOutperform

View More Analyst Ratings for PYPL
View the Latest Analyst Ratings

Posted-In: Jason Kupferberg Jefferies mastercard PayPalAnalyst Color Initiation Analyst Ratings Tech


Related Articles (PYPL)

View Comments and Join the Discussion!