PayPal Has 'Strong Secular Tailwinds,' $110T Total Addressable Market, Stifel Says In Upgrade

Paypal Holdings Inc PYPL hosted its bi-annual investor day presentation Thursday and convinced Stifel the company is much more than just a "button" or "online checkout company."

The Analyst

Stifel's Scott Devitt upgraded PayPal's stock rating from Hold to Buy with a price target lifted from $82 to $99.

The Thesis

Paypal's reputation as an online checkout company no longer applies, as the company made it clear it is now a global payments platform with a large addressable market opportunity, Devitt said in the upgrade note.

PayPal said it now has a total addressable market of roughly $110 trillion, which includes all online and offline sales, cross-border money transfers, payments and non-cash payments, the analyst said. 

PayPal's market share is less than 1 percent of the total market, with an estimated total payment volume of $581 billion in 2018, Devitt said. The size of the market alone is reason enough to believe multiple companies can successfully compete in the long run, he said.

PayPal wants to address 1 billion of a projected 6 billion global internet users over the next 10 years, according to Stifel. 

The analyst said PayPal deserves credit for actively opening its ecosystem while also seeking out new partnerships and initiatives, Devitt said Google users will soon be able to add their Paypal account to various platforms like YouTube and Google Play, and instant transfer functionality was recently added to the Venmo app.

PayPal is being driven by "strong secular tailwinds," and the company has the existing scale and portfolio of services to increase its already competitive position, Devitt said. 

Price Action

PayPal shares were up 1.14 percent in premarket trading Friday. 

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