With E-Commerce Shift Underway, BofA Has High Expectations For PayPal's Q2

Paypal Holdings Inc PYPL shares were trading higher on Monday after a BofA Securities analyst predicted the payment company will deliver a "big beat" in the second quarter. 

The PayPalAnalyst: Jason Kupferberg reiterated a Buy rating on PayPal with a price target lifted from $194 to $215.  

Previewing PayPal's Q2: PayPal is set to deliver a big second-quarter beat given that the massive growth in e-commerce is likely to drive significant upside potential to total payment volumes, Kupferberg said in a Monday note. (See his track record here.)

Consumer spending behaviors have shifted online during the coronavirus pandemic, he said. 

Aggregated credit and debit card data shows that U.S. e-commerce spending excluding travel remained robust in June, growing 78% year-over-year versus 86% in May, Kupferberg said. 

Total second-quarter e-commerce spending rose 79% year-over-year, and this is by far the highest quarterly growth rate in BofA's dataset going back to 2011, the analyst said, adding that it represents a huge acceleration from 18.5% year-over-year growth in the first quarter. 

Why PayPal Remains Strong: The stock has been strong, with shares more than doubling since its March lows verus a 42% rise in the S&P 500, Kupferberg said. 

“Going into the second-quarter print, there is the possibility that certain metrics don’t have quite as much upside as some expect, which could potentially result in some profit taking.” 

The analyst said he expects any weakness in shares to be limited and short-lived, adding that PayPal's shareholder base has grown sturdier in recent months.

The company is the best e-commerce pure play and will continue to take share from the larger in-store market, he said. 

“We believe PYPL represents a differentiated investment opportunity, as a $120 billion market cap company with upper-teens organic revenue growth, structural industry tailwinds, solid and improving margin profile, and balance sheet optionality.”  

PYPL Price Action: PayPal shares were trading 0.35% higher at $179.02 at the time of publication Monday. 

Related Links: PayPal Falls On Lower Q1 Guidance