Shares of digital payment processor PayPal were soaring after an analyst from KeyBanc Capital Markets had raised his price target on the stock on optimism over the new Venmo debit card.
Analyst John Beck increased his price target on shares from $100 to $105 and said that the Venmo debit card, “opens up the offline world of commerce” to Venmo.
The card also makes the peer-to-peer money-transfer service more of a financial app that people could use to manage their money.
He wrote in a note, “Peer-to-peer (P2P) has served as a fantastic engine to create a substantial consumer base and recent product enhancements create monetization opportunities, which could transform these platforms from ‘loss-leaders’ to ‘money makers.”
According to Beck, he projects $93 billion of Venmo peer-to-peer volume for 2019 and estimates that every $5 billion of spending on Venmo debit cards could boost earnings per share by 2 cents.
It was this past June that PayPal rolled out the Venmo debit card for its Venmo app users in order to broaden its reach. Venmo is one of the most widely used mobile apps in the U.S. for peer to peer payments.
The debit card allows users to withdraw up to $400 daily and can also use their Venmo mobile app balances in stores for payments.
The card is competing with Square’s mobile payment app, Cash App, bank-backed Zelle. It was recently revealed that while Venmo processed payments worth $12 billion in the first quarter, more than $25 billion moved through Zelle’s network in the same period.
Raymond James has also resumed coverage of PayPal with an “outperform” rating and has set a price target of $108.
The firm’s analyst John Davis had a $85 price target previously before suspending coverage. He wrote, “Simply put, PayPal should continue to benefit from the secular shift to eCommerce that should drive roughly 20% revenue growth, which coupled with margin expansion and capital allocation (M&A + buybacks) should in turn result in mid-20s earnings growth for the foreseeable future.”
According to the analyst, potential catalysts include the company’s monetization of its peer-to-peer Venmo service as well as future mergers and acquisitions.
Shares of PayPal are up almost 50% over the past 12 months.