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On Thursday, TD Cowen analyst Bryan Bergin increased the price target for PayPal (NASDAQ:PYPL) stock to $90.00, up from the previous $78.00, while maintaining a Hold rating on the shares. Bergin noted that PayPal has shown strong performance recently, with momentum still in its favor, particularly in the fourth quarter due to an acceleration in branded checkout volumes. This momentum is reflected in PayPal's impressive 50.48% price return over the past six months. According to InvestingPro analysis, PayPal is currently trading below its Fair Value, suggesting potential upside opportunity.
The analyst highlighted that PayPal's fourth-quarter activity, including holiday spending, had slightly exceeded expectations. With a market capitalization of $89.48 billion and revenue growth of 8%, PayPal continues to demonstrate its market leadership. Furthermore, the recent interest rate movements suggest there could be additional upside for the company's total payment volume (TPV) growth in both the fourth quarter and the fiscal year 2025. InvestingPro subscribers can access 7 additional key insights about PayPal's growth prospects and financial health.
Bergin pointed out that while the fiscal year 2025 estimates do not seem to hold significant upside, the guidance could potentially reveal TPV growth above the third-quarter view, as the impact of interest rate headwinds appears to be less severe. He also mentioned that the path to Investor Day is becoming clearer, which could serve as a catalyst for the stock.
The analyst drew attention to the acceleration in consumer spending reported in bank earnings, suggesting that an increase in PayPal's FXN Branded checkout volume growth above 6% is likely. This growth is seen as crucial for the continued success of PayPal's shares.
Despite the recent optimism surrounding PayPal's stock, which has seen an 11.8% increase over the last three months and a 3.4% rise in the last month, Bergin believes that the initial fiscal year 2025 outlook estimates may not have meaningful upside. Trading at a P/E ratio of 21.07 with a favorable PEG ratio of 0.81, PayPal shows attractive valuation metrics relative to its growth potential. He expects the company to continue its messaging around TPV growth, excluding interest income, to at least match fiscal year 2024 levels, which were trending at a 4% year-to-date increase as of the third-quarter end. For detailed valuation analysis and comprehensive insights, investors can access PayPal's full research report on InvestingPro.
Lastly, the analyst mentioned that while the volume headwind from Braintree's repricing is expected to continue, it should not drag on TPV growth due to a positive contribution from the price-to-value strategy already in place.
In other recent news, PayPal's Executive VP has departed, leaving with a severance package as per the company's Executive Change in Control and Severance Plan. The company has not yet announced a successor. The severance package includes severance pay, a bonus for fiscal year 2024, continued health benefits, equity award treatment, and outplacement services. On the financial analysis front, Jefferies has maintained a Hold rating on PayPal, emphasizing the importance of the company's branded Total (EPA:TTEF) Payment Volume (TPV) growth for its future success. Susquehanna analysts have shown optimism, raising their price target on PayPal shares due to the company's consistent financial performance and potential for sustained mid-single-digit growth. In a similar vein, Keefe, Bruyette & Woods (KBW) has expressed optimism about PayPal's ability to surpass gross profit growth expectations for 2025. However, PayPal is also facing a lawsuit alleging racial bias in its investment program, which has reportedly cost businesswoman Nisha Desai and her venture capital firm millions of dollars. These are the recent developments surrounding PayPal.
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