PayPal Touts $6B In Cash, Analyst Expects New Leadership To Prompt Accretive M&A

Shares of PayPal Holdings Inc PYPL started the new year with a bang, with a spike in early trading on Tuesday.

Street revenue estimates appear “reasonable,” while the company’s net cash of around $6 billion offers “M&A/buyback flexibility” and new leadership “could prompt strategically accretive M&A, according to Truist Securities.

The Analyst: Andrew Jeffrey upgraded the rating for PayPal Holdings from Hold to Buy, while raising from $75 to $95.

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The Thesis: Investors seem to be “too negative” on the company’s durable long-term organic revenue growth “in light of branded share loss and faster growing low-yield Braintree (BT) vol,” Jeffrey said in the upgrade note.

“Importantly, Street rev growth ests now mirror this view, vs last yr when we were meaningfully below consensus,” the analyst wrote. “We also like BT's competitive position, which along w/recovering eCommerce vol,” should enable PayPal to each 10% and 11% organic revenue growth in 2023 and 2024, respectively.

Jeffrey also says that a "new CEO would be positioned to build" on current CEO Dan Schulman's success and wield "a freer M&A hand."

New leadership would also move the company into "card present acquiring, expanding its TAM and boosting terminal rev/EPS growth,” Jeffrey added.

PYPL Price Action: Shares of PayPal Holdings had risen by 3.99% to $74.06 at the time of publication Tuesday.

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