According to Jefferies, payment processor PayPal (NASDAQ:PYPL) is a buy due to its market leadership in online payments.
The firm has reiterated a “buy” rating on the stock and has forecast that the company will grow faster than the e-commerce industry, citing PayPal’s large active user base of 244 million and strong payment volume growth rates.
Analyst John Hecht wrote in a note, “PayPal core business trends are showing impressive growth. We believe that PayPal is in a unique position in the payment ecosystem with a strong and growing set of direct relationships with a large number of both consumers and merchants.”
He added, “We expect PayPal to continue to outpace broader e-commerce industry volume growth rates given PayPal’s broad consumer base and extensive merchant footprint.”
The analyst has raised his price target on the stock from $100 to $110.
According to Hecth, PayPal (NASDAQ:PYPL) had 244 million active registered account at the end of June. This was a 13 percent annual growth rate since 2008. He also noted PayPal’s mobile total payment volume ex-Venmo grew 40 percent while daily active users for PayPal’s mobile app was about 600,000 in the second quarter.
He wrote, “The rapid growth in active accounts has driven continued transaction and [total payment volume] growth. App Data shows PayPal platforms still have significant share and usage.”
It was in July that PayPal reported second quarter results that revealed earnings topping estimates but revenue outlook for the third quarter falling short of what analysts had expected.
For the second quarter, PayPal reported earnings per share of 58 cents, a penny higher than what analysts had expected. Revenue at $3.86 billion was also better than the $3.81 billion that analysts had been waiting for. Revenue had jumped 23% from the year ago period.
Looking ahead, the company had forecast profit in line with analysts, but revenue was a miss. Earnings per share is expected to be in the range of 53 and 55 cents and revenue is expected to be in the range of $3.62 billion and $3.67 billion. Analysts were waiting for earnings per share of 54 cents and revenue of $3.71 billion.
It was also recently that Third Point hedge fund manager Daniel Loeb said his fund added a new position in PayPal during the second quarter. According to Loeb, the stock price will rise to $125 within 18 months.
“We see parallels between PayPal and other best‐in‐class internet platforms like Netflix and Amazon: high and rising market share, untapped pricing power, and significant margin expansion potential,” said Loeb.
Shares of PayPal are up about 23% this year so far.