A Primary Beneficiary Of The Ongoing E-Commerce Boom Will Be PayPal

There is one company that is best positioned to take full advantage of the "inexorable trend" of payments moving from offline to online channels: Paypal Holdings Inc PYPL, analysts at Bank of America commented in a research report. The firm's Jason Kupferberg maintains a Buy rating on PayPal's stock rating with a price target boosted from $71 to $78.

Global e-commerce penetration as of 2016 stood at just 9.5 percent and is projected to increase by 100 basis points year over year through 2018, Kupferberg commented in a research report. This bodes well for PayPal, whose business is almost entirely in the online and digital channel and comes at a time when it is growing faster than the overall e-commerce market.

Meanwhile, shares of PayPal have already gained more than 60 percent in 2017, but this could be interpreted as a "catch-up" period after investors were concerned with the competitive environment and disintermediation, the analyst suggested. Granted, the stock is no longer cheap but there are four notable catalysts to support shares higher over the next six months to one year, including:

1. Quarterly execution.
2. Management offering a revised guidance to the upside.
3. The sale of its credit portfolio to finance a share buyback program or M&A.
4. Operating margin expansion.

Finally, PayPal could shift to a GAAP accounting method given its "significant" level of stock-based compensation, the analyst also added. This would be a welcome move by the Street as fundamentals trump accounting changes.

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