One of the firms followed here at 24/7 Wall St. is regional boutique broker Wedbush, which over the years has built a strong reputation on stock picking, often following companies that have smaller market capitalizations than the blue chips.
The firm has now added PayPal Holdings Inc. (NASDAQ: PYPL) to its Best Ideas List. Thus far, during the month of June, the Wedbush Best Ideas List returned 3.8%, compared to 2.4% for the S&P 500. Year to date, the Best Ideas List has returned 22.10%, compared to 3.60% for the S&P 500.
Essentially, the firm believes that the ongoing/recent monetization efforts on both consumer and merchant-facing platforms, Visa/MasterCard/banking partnerships, as well as the post-eBay separation, could offer potential opportunities, accelerating top-line growth, while expanding margins.
Wedbush has an Outperform rating for PayPal with a $100 price target, which implies a 20% upside compared to Thursday’s closing price of $83.27.
Wedbush gave its perspective as follows:
Specifically, we believe: 1. Dominant presence in Mcommerce– a hyper growth segment within ecommerce, expected to post 20%+ volume growth over the next few years (eMarketer data). As recently as 2017, mobile payment usage in North America represented 50% of total payment volume and mobile payment adoption is expected to continue to expand; 2. PYPL’s agreements with the major networks (Visa and MasterCard) to eliminate steering and share transaction data can be a significant driver of volume growth over the long term, removing potential competitive concerns. In addition, the benefits from volume acceleration, reduced onboarding friction, fee concessions, access to tokenization, and the ability to work directly with issuers will likely offset a potential dilutive impact from terminating steering; and 3. The agreements with the networks triggering multiple alliances/partnerships with banks/card issuers, where card holders will also have access to their rewards programs for online and mobile purchases, where PayPal is accepted.
Shares of PayPal traded at $83.80 on Friday, with a consensus analyst price target of $87.05 and a 52-week trading range of $50.83 to $86.32.