Barclays Starts PayPal At Overweight, Sees '1st Mover Advantage' In eCommerce Topping Competitive Risks

In a report published Wednesday, Barclays analyst Darrin D. Peller initiated coverage of Paypal Holdings Inc PYPL with an Overweight rating and a price target of $47.

Analyst Darrin Peller commented, “We see its first-mover advantage and brand awareness in eCommerce sales (projected to grow at a 2013-2018 CAGR of 18%) as key, helping to drive outsized growth vs. industry trends.”

PayPal generated about 20 percent y/y growth in top-line on a constant currency basis in both 2013 and 2014. Peller expressed optimism regarding the company delivering “a long runway for growth” without “any reason for a slowdown” in view of the current payment industry trends.

Peller believes that PayPal’s constant currency revenue growth guidance of 15-18 percent for 2015 may prove “conservative,” and expects the company to be able to sustain top-line growth in the high-teens over the next few years.

In the report Barclays noted, “In addition to strong eCommerce growth, we see further support for revenue growth from market share capture driven by EMV and potential margin expansion given expected November/December implementation of interchange rate caps in Europe.”

While establishing the FY16 EPS estimate at $1.50, Peller said that there could be upside from:

1. Better-than-guidance growth at eBay Inc EBAY
2. Braintree and One Touch
3. European interchange caps
4. “A continued shift to lower cost funding sources such as PayPal Credit”
5. Money Transfer
6. SMB lending products