PayPal Shows Progress Being Made For Growth, Could Have EPS Upside With Conservative Guidance: What 7 Analysts Are Saying

Digital payments company PayPal Holdings (NASDAQ: PYPL) reported fourth-quarter financial results after market close on Thursday. Here’s what analysts are saying about the company’s results and guidance.

The PayPal Analysts: Needham analyst Mayank Tandon had a Hold rating on PayPal and no price target.

Canaccord analyst Joseph Vafi had a Buy rating and a price target of $160.

Morgan Stanley analyst James Faucette had an Overweight rating and a price target of $133.

Oppenheimer analyst Dominick Gabriele had an Outperform rating and raised the price target from $85 to $90.

RBC Capital analyst Daniel Perlin had an Outperform rating and a price target of $96.

Mizuho analyst Dan Dolev had a Buy rating and a price target of $100.

KeyBanc Capital Markets analyst Josh Beck had a Sector Weight rating and no price target.

Related Link: Trading Strategies For PayPal Stock Before And After Q4 Earnings 

The Analyst Takeaways: Needham's Tandon called the risk/reward on PayPal shares neutral with fourth-quarter results coming in mixed.

“While we like the early signs that management is making progress on enhancing shareholder value, given the muted NT revenue growth outlook, and with the shares expected to open at an ex-cash FY24 P/E multiple of 13x, we believe the stock is fairly valued,” Tandon said.

The analyst saw the company’s business pressured by a “tough economic environment,” which may have led to revenue guidance being withheld for fiscal year 2023.

Canaccord's Vafi said the cost initiatives by PayPal were working and growth investment could continue.

“PYPL delivered a steady quarter for Q4, but the real thesis discussion from here is about the future, and we are more positive on the PYPL investment case now than before the print,” Vafi said.

The analyst added that PayPal management highlighted the ability to post high-teen earnings per share growth.

“We are also positive on the company’s newly announced drive to move into unbranded payment solutions in the smaller business segment, while also doubling down on the P2P experience across both the core PayPal and Venmo platforms.”

Vafi said PayPal’s core value proposition is e-commerce and the doubling down on personal finance could help with return on investment.

“There clearly remains plenty of monetization opportunities here in the base itself, including the personal finance angle. Importantly, we believe a lot of these collective efforts should drive a decent year in 2023.”

Morgan Stanley's Faucette also pointed to progress being made by PayPal in its growth efforts, which along with the reacceleration of e-commerce growth keeps an Overweight rating from the analyst.

“Addressing tech to-do list will help maintain wallet lead, and earnings brings evidence of progress,” Faucette said.

The analyst said the most encouraging part of the earnings report was management updating progress on modernizing its technology.

“We view these efforts as key to improving the consumer experience and improving the ability to add future wallet functionality, which we think is key to ultimately increasing habituation and frequency of use.”

Oppenheimer's Gabriele raised the price target on PayPal shares saying 2023 guidance finally isn’t “normalized.”

“We understand the competition headwinds investors are focused on but if PYPL can grow in line to slightly faster than e-com, its EPS growth is likely faster than most payment peers and the discount of the networks is still large,” Gabriele said.

A spending slowdown could impact the stock, but the analyst said investors with long time horizons should consider PayPal at current price levels.

RBC Capital's Perlin said there were several question marks with PayPal now with the announcement that CEO Dan Schulman is leaving and fiscal year 2023 guidance not answering all questions.

“PYPL is by no means out of the woods, but we believe progress is being made, as its cost structure is being reigned in to fit its current near-term growth trajectory,” Perlin said.

Conservative revenue guidance and fixed cost leverage could be a recipe for earnings per share upside in 2023 according to Mizuho's Dolev.

“The critical nuance of PYPL’s 4Q report was the embedded conservatism in the 2023 top-line guide,” Dolev said. “We believe PYPL is being overly conservative.”

The analyst said the company could be pricing in worst-case scenarios of Europe and the U.S. going into recession, inflation staying high and spending remaining weakened.

“We see ample potential for EPS upside in 2023 in the likely scenario in which revenue growth exceeds management’s conservative framework.”

KeyBanc's Beck said PayPal maintaining its market share placed the company in the middle of the bull/bear debate.

“We walk away from the report neutral as we balance positives such as rising attach rate of advanced checkout flows with a lack of visibility into multiyear transaction profit fueled growth due to share and e-com market uncertainty,” Beck said.

PYPL Price Action: PayPal shares are up 1.10% to $79.32 on Friday at publication.

Read Next: PayPal Stock Surges Above This Bellweather Indicator, What To Watch For Next 

Photo: Jirapong Manustrong via Shutterstock