PayPal Remains A Major Beneficiary Of The Unstoppable Growth In E-Commerce

Paypal Holdings Inc PYPL is scheduled to report its Q4 2016 results on Thursday. PayPal will likely report another revenue beat, driven by “a solid online holiday season and the company’s expanding merchant base, Loop Capital Markets’ Joseph Vafi said in a report.

Vafi maintains a Hold rating on the company, with a price target of $44. He commented that there was “no stopping” PayPal’s top-line growth and that the company was “a major beneficiary of the unstoppable growth in eCommerce.”

Top-Line Expectations

Vafi expects the company to report market share gains in Q4. PayPal’s revenue outperformance is likely to be driven by comScore’s estimate of a 12-percent increase in e-commerce holiday sales as well as the company’s expanding merchant base. Moreover, PayPal is expected to close $4 billion in annualized run rate third-party verification.

Bottom-Line Expectations

“Management’s recent comments about driving cost efficiency, perhaps with a focus on recently acquired Xoom could pay bottom line dividends,” the analyst wrote.

When it was acquired, Xoom Corp (previously traded XOOM) was spending about $170 million in annualized run rate operating expenses. “Given complimentary marking strategies and back end processing/security infrastructures, we believe most of Xoom’s operating overhead is absorbed into that of PYPL over time, equating to several hundred basis points of SGA leverage,” Vafi mentioned.

In pre-market trading Monday, shares of PayPal were up 0.74 percent at 42.