Look For PayPal's Growth Momentum To Continue In 2017

Cantor Fitzgerald reiterated its Overweight rating on Paypal Holdings Inc PYPL shares saying it expects the company’s growth momentum to continue.

The comments came after PayPal reported an in-line earnings and revenue, driven by robust growth in TPV and strength in key user metric.

Quarterly Gist

• Q4 adjusted EPS of $0.42 came in line.
• Revenue was $2.981 billion versus estimate of $2.98 billion.
• Expected Q1 2017 adjusted EPS $0.40–$0.42 versus estimated $0.42.
• Expected Q1 revenue $2.9 billion–$2.95 billion versus $2.95 billion estimated.
• FY 2017 adjusted EPS $1.69–$1.74 versus $1.73 estimated.
• Sales at $12.45 billion–$12.65 billion versus estimated $12.62 billion.

The company’s TPV rose 25 percent, merchant services up 30 percent. PayPal’s Venmo segment saw robust volume growth of 129 percent and mobile TPV grew 53 percent.

Paypal saw its active customer accounts rising 10 percent, while engagement (transactions/user) grew an impressive 13 percent to 31.1 million, suggesting PayPal's increasing appeal. Results from One Touch and "Customer Choice" initiative are also showing positive trends.

Analyst's Commentary

Analyst Youssef Squali views management commentary of in-line costs related to the rollout of the "Customer Choice" initiative a net positive for PayPal as it is boosting engagement levels.

“We also view raised revenue growth for 2017 as a sign of management's growing confidence in its ability to sustain growth momentum in core registered in the last several quarters, buoyed by product extensions/introductions and partnerships,” Squali wrote in a note.

Shares of Paypal closed Thursday’s trading at $41.50. In the pre-market hours Friday, the stock is down 1.57 percent to $40.85. Squali has a target price of $48 on the stock.