PayPal Stands Out In Crowded Online Payments Space, Atlantic Securities Says In Upgrade

In an online payment space that's in an "evolving" stage with many players, Paypal Holdings Inc PYPL stands out with a convenient and differentiated checkout experience, according to Atlantic Securities.

The Analyst

Atlantic Securities' Kunaal Malde upgraded PayPal's stock rating from Neutral to Overweight with a $99 price target.

The Thesis

PayPal's status as a global leader is clear given its 220 million-strong consumer base and 19 million merchants, Malde said in the upgrade note.

Despite its strong growth among merchants and consumers, there is still plenty of room for PayPal to grow in the following ways, the analyst said:

• The copying of Chinese peers who expanded into financial services such as money market funds and insurance.
• An expansion of merchant tools with the help of the recent acquisition of iZettle.
• Geographic expansion.
• Targeting online marketplace platforms with help from the acquisition of Hyperwallet.

PayPal stock is trading at 33 times non-GAAP 12 month forward PE, which is a premium to major credit card players whose stock trades at multiples between 27 and 29 times, the analyst Malde said.

PayPal's 20-percent compounded annual earnings per share growth guidance justifies a premium valuation, the analyst said. Atlantic's $99 price target is based on 36 times next year's EPS estimate of $2.43 plus $11 of net cash per share.

Price Action

PayPal shares were up 0.71 percent at the time of publication Thursday at $86.59. 

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