Why PayPal's Crypto Initiative Is Turning BTIG Bullish

PayPal Holdings Inc PYPL shares were advancing Thursday after a sell-side analyst took a bullish stance on the payments stock.

The PayPal Analyst: BTIG analyst Mark Palmer upgraded PayPal from Neutral to Buy with a $300 price target.

The PayPal Thesis: The accelerating shift toward digital payments due to the COVID-19 pandemic has likely steepened PayPal's long-term growth trajectory, Palmer said in a note.

This is evident from the company's announcement in October that its 333 million active users would be able to buy, hold and sell Bitcoin and other cryptocurrencies using their PayPal digital wallets, the analyst said. 

The spike in trading volumes seen in recent weeks by the itBit cryptocurrency exchange that powers PayPal's crypto initiative suggests crypto could add more than $1 billion to PayPal's annual revenues in 2022, he said. 

This bodes well for PayPal's active account growth and engagement, Palmer said. 

PayPal's Feb. 3 earnings report will likely provide affirmation of the initial success and significant promise of the effort, the analyst said.

Related Link: PayPal Becomes First Foreign Company To Fully Own A Payments Platform In China

"While PYPL CEO Dan Schulman recently stated that the company has a goal of 1mm active users on its platform, the company could sustain and accelerate its growth through increased engagement alone, in our view," he said. 

The analyst also sees the company benefiting from the removal of card intermediaries from merchant transactions executed using Bitcoin and three other supported cryptocurrencies. 

The lower-cost funding associated with the use of crypto in funding merchant transactions could provide a boost to PayPal's take rate and margins, according to BTIG. 

PYPL Price Action: At last check, PayPal shares were advancing 2.43% to $250.20. 

Related Link: Analyzing PayPal Holdings's Unusual Options Activity

Photo courtesy of PayPal.