PayPal's Q3 Revenue Risks Priced In, Says Analyst

BofA Securities analyst Jason Kupferberg reiterated a Buy rating on the shares of PayPal Holdings Inc PYPL with a price target of $79.

PayPal is slated to report its third-quarter FY23 earnings on November 1.

Aggregated BAC credit and debit card data showed U.S. eCommerce spending growth (ex. travel/events) improved to 0.8% in 3Q Y/Y vs. -0.9% in 2Q.

PYPL disclosed branded TPV growth of 6.5% in June and 8%+ in July, and forecasted high-single-digit growth for 2H, which could prove to be too optimistic given macro choppiness, said the analyst.

The analyst thinks transaction profit growth will trough in 3Q at -3.9%, and the pace of re-acceleration in 4Q and FY24 will be a critical factor for the stock.

The 3Q call will be Alex Chriss' first public appearance as CEO. The analyst expects him to bring a renewed sense of urgency to product deployment, and the Street will be focused on how he can leverage his SMB expertise to drive PPCP adoption.

Expectations are low, and at ~10x '24 adj. P/E, the analyst sees limited downside risk to shares on the print. While macro uncertainty and competition remain potential risks, PYPL has a differentiated 2-sided network as a pure-play e/m-commerce platform, noted the analyst.

The analyst believes PYPL's story has improved due to continued strength of global franchise, positive inflection in revenue trends, high EPS visibility, robust FCF/return to cash, and attractive valuation.

Price Action: PYPL shares are trading lower by 0.91% at $55.84 on the last check Friday.