The Street Debates What's Next For PayPal After Impressive Q2 Beat

Payments company Paypal Holdings Inc PYPL reported Wednesday afternoon with second-quarter results highlighted by an EPS, revenue and total payment volume beat.

Here's how PayPal analysts are reacting to the company's results and outlook.  

The PayPal Analysts: Wedbush analyst Moshe Katri maintains an Outperform rating on PayPal's stock with a price target lifted from $200 to $220.

BofA Securities Jason Kupferberg maintains a Buy rating on PayPal's stock with a price target lifted from $215 to $235.

Rosenblatt Securities analyst Kenneth Hill maintains a Buy rating on PayPal's stock with a price target lifted from $196 to $204.

Raymond James analyst John Davis maintains an Outperform rating on PayPal's stock with a price target lifted from $171 to $218.

Oppenheimer analyst Jed Kelly maintains an Outperform rating on PayPal's stock with a price target lifted from $140 to $230.

Wedbush On PayPal's 'Monster' Quarter: PayPal reported a "monster" quarter that marks the early stages of success in new monetization initiatives, Katri said in a note.

Revenue of $5.26 billion beat estimates of $5 billion; EPS of $1.07 beat estimates of 87 cents; and the non-GAAP EBIT margin of 28.2% was up 500 basis points.

TPV showed a 30% growth rate on a constant currency basis, while active accounts grew 21% from last year to 346 million, including 26 million merchants, the analyst said.

Venmo TPV was up 52% from last year to $37 billion, while its active base rose by 60 million users, according to Wedbush. 

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BofA Says PayPal's Beat 'Big Enough' 

PayPal reported a "big enough" beat to justify the stock's move higher, as the company impressed investors across all key metrics, Kupferberg said in a note. Encouragingly, the momentum could continue, as the COVID-19 pandemic merely accelerated the penetration of e-commerce spending by several years, in the analyst's view. 

"We remain bullish, given PYPL's significant scarcity value and structural benefits from the pandemic."

Rosenblatt On PayPal's In-Store Update

PayPal signaled a "sharper focus" on investments related to in-store capabilities, Hill said in a note.

The COVID-19 pandemic accelerated PayPal's efforts across multiple initiatives, including point-of-sale, in-store, buy online, pick up in-store, order ahead, pay at table and home delivery, the analyst said. 

PayPal is also heavily investing in QR code technologies, and the company is looking to introduce an integrated POS QR feature in the U.S. and Europe this quarter, he said. 

Most notably, PayPal or its Venmo QR codes will be featured at 8,200 CVS retailers across the U.S., according to Rosenblatt. 

Raymond James Says PayPal's Guidance 'Even Better'

PayPal's second-quarter print was impressive, and its guidance was "even better," Davis said in a note.

PayPal reinstated its 2020 guidance above what the buy-side community expected, and this suggests its recent momentum can be sustained, the analyst said. 

PayPal's third-quarter and bottom-half 2020 guidance calls for FX-adjusted revenue growth to remain elevated at a conservative estimate of 25%, he said. 

Oppenheimer Says PayPal's Premium Valuation Justified

PayPal's report makes it clear the company is leveraging its large network to become the best-positioned payments company in the fast-growing space, Kelly said in a note.

A premium valuation on the stock is justified, the analyst said. 

Oppenheimer's $230 price target is based on 40 times 2022 estimated EPS, representing a premium of five times to the three-year average.

PYPL Price Action: Shares of PayPal hit a new all-time high Thursday morning at $198.64 and were seen trading higher by 4.41% to $192.75 at last check. 

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Posted In: BofA SecuritiesCoronavirusJason KupferbergJed KellyJohn DavisKenneth HillMoshe KatriOppenheimerpaymentsRaymond JamesRosenblatt SecuritiesWedbushAnalyst ColorEarningsNewsGuidancePrice TargetReiterationAnalyst Ratings