Bloomberg
PayPal’s dominant position in the digital payment market led analysts to take a bullish stance on the former eBay subsidiary Monday, as it returned to trading as an independent entity.
The payment processor PYPL, +6.88% , which was spun off from eBayEBAY, +3.05% after the close on Friday, opened at $39.80, and rose to above $40 by midday. Analysts cited strong organic revenue growth and the company’s leading market share as reasons for optimism.
J.P. Morgan analyst Tien-tsin Huang initiated coverage of the stock at overweight and set a $48 price target, saying that PayPal’s strong brand and global growth potential are positives.
“PayPal is the gorilla among independent digital payment service providers,” Huang wrote in a note to investors. “With more than 160 [million] active accounts, global scale and brand recognition, [it] could offer real strategic value to leading commerce/content/social/device platforms seeking better user monetization as well as financial institutions/technology firms seeking richer digital content.”
Wells Fargo analyst Timothy Willi initiated coverage at outperform with a valuation range between $43 and $45. He noted that PayPal’s acquisitions of digital payment companies Braintree and Paydiant will allow it to grow in the mobile sphere.
“We believe PayPal is capable of generating [earnings per share] growth that approximates 20% during the next handful of years, placing the company near or at the top of our transaction processing universe and making the company deserving of a premium valuation,” Willi wrote.
Bill Carcache of Nomura wrote that PayPal’s independence from eBay will allow it to partner with companies previously off limits, increasing its potential for growth. Carcache initiated coverage at buy and set a target price of $46.
“The [PayPal] story is all about optionality,” Carcache said.
Last week, Susquehanna initiated coverage of PayPal with a $75 price target. Analyst James Friedman said the company’s road map suggests it has serious ambitions as it seeks broader merchant acceptance and increased consumer usage.
Friedman cited the buying power of PayPal’s active customers, technology capabilities that help merchants, potential collaborations in its Paydiant customer base and key assets Venmo and Braintree as potential keys to PayPal’s success moving forward."
.
