How Analysts View PayPal After Earnings

Electronic payment processor PayPal Holdings Inc. (NASDAQ: PYPL) reported fourth-quarter results last Wednesday that beat analysts’ consensus estimates for both earnings per share (EPS) and revenues. The stock bounced from about $31.60 at the closing bell on Wednesday to close Friday at about $36, a gain of 12.5% over the next two trading days.

During the fourth quarter, the company announced that its board of directors had authorized a new share repurchase program, under which the company may repurchase up to $2 billion in outstanding common stock. The company guided first-quarter EPS in a range of $0.34 to $0.36 and revenues in a range of $2.47 billion to $2.52 billion. Consensus estimates called for $0.35 in EPS on $2.48 billion in revenues.

Analysts’ reactions to PayPal’s fourth-quarter results generally kept prior ratings and reduced price targets. Canaccord Genuity lowered its price target from $44 to $40 but kept its Buy rating, citing quarterly results that showed “well-rounded growth despite FX headwinds.” Analyst Michael Graham said:

In its second quarter after the spinoff from eBay, PayPal … [beat] consensus by 2% and EPS … by 5%. We find these results to be supportive of our positive investment thesis on PayPal, which centers around: 1) secular tailwinds from shift to non-cash, eCommerce, and smartphones; 2) upside potential from Braintree, Venmo, and One Touch; and 3) a reasonable valuation that can support stock price appreciation with steady, high-visibility growth (and a $2B buyback authorization).

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Other reactions included:

• Credit Suisse lowered its target price from $43 to $39 and maintained an Outperform rating.
• Jefferies maintained its Buy rating and its $44 price target.
• Raymond James lowered its target price from $45 to $40.
• RBC Capital Markets maintained an Outperform rating but cut the price target from $46 to $42.
• Wedbush raised it from Neutral rating to Outperform.

That close of $36.14 represented a rise of 5.5% on Friday. The 52-week trading range is $30.00 to $42.55, and the consensus price target as of Friday’s close was $40.66, but that may change as new data are folded in.