The Signs Point to a Strong Display in Q2, Says Analyst

It’s that time of the year again and another earnings season is upon us. Some of the U.S.’ biggest banks will be reporting Q2 numbers this week. However, it is one of the financial world’s big disruptors – PayPal (PYPL) – which Deutsche Bank’s Bryan Keane is keeping a tab on.

The digital payments specialist only reports on July 28, but Keane is readying investors for another strong display.

“PYPL continues to strategically transform its platform,” the 5-star analyst said, “Becoming the trusted provider of digital commerce and unified financial services experiences with travel/events starting to recover.”

The economic recovery has been a focal point for many industries, and behind Keane’s confident take are some robust e-commerce volumes for physical goods. Boosted by “consumer strength from pent-up demand, recovery in SMB and travel/events, and continued strength in engagement,” the analyst says there could also be potential upside to PayPal’s TPV (total payment volume) growth in Q2.

Keane’s current estimates – 2Q21 revenue of $6.260 billion and EPS of $1.12 – indicate 30% cc (constant currency) TPV (total payment volume) growth. However, expecting strong showings from the travel/events eComm market – an 85% year-over-year uptick – and Venmo revenue to increase by 60% from the same period last year, Keane estimates that in Q2, the company has the potential to grow TPV by up to ~36% cc.

Moreover, PayPal also stands to benefit in a big way from SMBs’ (small-to-medium sized businesses) post-covid recovery. Keane estimates SMBs account for approximately 45% of total TPV and the “large majority of active merchants.”

Looking ahead, it is the expansion of PayPal’s digital wallet and the expected Q3 launch of the first iteration of the “super app” which Keane expects will drive “higher share of checkout volumes and better product monetization.” This is due to the fact services such as Honey, bill pay, direct deposit, check cashing, budgeting tools, Buy Now, Pay Later (BNPL), and Crypto will all be integrated which will result in “higher engagement” levels.

Keane thinks all the above merits a new price target, which puts PayPal’s valuation ahead of other payment networks. Keane, however, claims this is justified given the company’s “strong outlook over the mid-term and significant investments being made to enhance the digital wallet and drive engagement.”

As such, the figure moves from $310 to $360, suggesting one-year upside of 19%. No need to add, Keane’s rating remains a Buy. (To watch Keane’s track record, click here)

Looking at the consensus breakdown, evidently most of Wall Street’s analyst corps agree. The stock has a Strong Buy consensus rating, based on 21 Buys vs. 3 Holds. That said, the $323.96 average price target suggests shares have room for just ~7% uptick in the months ahead. (See PYPL stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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