Thread: Traders cashing in on PayPal success

Traders cashing in on PayPal success

PayPal share price is rising and is being backed to keep growing by analysts who have overcome earlier concerns about the renegotiation of its deal with eBay with Deutsche Bank particularly excited about its monetisation of social payment app Venmo

It looks like a great time for traders to start getting friendly with PayPal (PYPL) shares. Morgan Stanley’s James Faucette upped his price target to 76 from 62. Faucette is one of many analysts who are enthusiastic about the online payment service provider.

The above chart plots the increase in share value which has grown steadily from the beginning the year. Many analysts expect this to continue after the Q3 earnings report release.

Faucette has noted that the market may have been overly concerned about a potentially negative impact of renegotiation of its contract with eBay. PayPal is maintaining its massive acceptance as an e-commerce website over other digital wallets.

Strong consumer trust

What PayPal has over its competitors is consumer trust. It feels like it has been around for a long time, and that’s a priceless commodity in the e-commerce age.

PayPal has expanded into a payments service provider since its spin-off from former parent company eBay in 2015. Its deals with Visa and Mastercard in 2016, which give consumers more options at online checkout, are also yielding benefits. It has also incorporated mobile payments into its operations.

Bernstein’s Lisa Ellis sees the company grabbing an even greater portion of the market over the next three years, while analysts at BTIG, Merrill Lynch and Barclays offer an equally positive prognosis.

One possible growth area for PayPal is by forming partnerships with retailers who are looking to compete better with Amazon.

The Venmo ‘crown jewel’

Deutsche Bank have described PayPal’s social payment app Venmo as its “crown jewel”. They believe Venmo will accelerate revenue growth in the coming months and years.

Buckingham Research initiated Paypal’s stock at buy. They say that “nowhere are the prospects higher” in the payments arena – a ringing endorsement.

Many see contract renegotiation with eBay in 2020 as unlikely to significantly impact on PayPal’s earnings. A continuation of their ongoing relationship as eBay’s preferred payment provider is highly likely. Both companies benefit from each other and if the terms are less favourable, the American P2P market is predicted to triple in size by then. As such PayPal should be far less reliant on eBay.

PayPal’s third quarter earnings report is just around the corner. That makes this a great opportunity for traders to take a position. This is no flash in the pan. PayPal has reported strong double-digit top-line growth for several years now.


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