What to Watch For in PayPal’s Q3

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PayPal Holdings Inc. (NASDAQ: PYPL) is set to report its most recent quarterly results after the markets close on Wednesday. Thomson Reuters consensus estimates call for $0.54 in earnings per share (EPS) and $3.66 billion in revenue. In the third quarter of last year, the company said it had EPS of $0.46 and $3.24 billion in revenue.

Recently, the boutique brokerage firm Wedbush weighed in on PayPal, including it in the Best Ideas List going into the fourth quarter. PayPal was maintained with an Outperform rating and a $100 price target.

In the report, Wedbush said that it believes ongoing/recent monetization efforts on both, consumer and merchant-facing platforms, as well as post-eBay separation potential opportunities, could accelerate topline growth while expanding margins.

Also, during the next six to 12 months, the firm thinks that monetization efforts from Venmo and recently acquired iZettle likely will improve the company’s take-rates, which are beginning to provide incremental revenue/margin enhancement opportunities.

Wedbush points to three main catalysts for PayPal’s stock in the report:

1. PayPal’s merchant-facing monetization efforts will likely result in improving volume trends. The recent acquisition of iZettle significantly boosts the company’s merchant-facing monetization effort (led by Braintree and Paydiant), providing its 19MM merchants with an enhanced Square-like OMNI-channel platform for conducting their daily operations; 2. Paypal’s consumer-facing monetization efforts will likely result in improving volume trends, as “Pay-With-Venmo” gradually gains traction; and 3. Growing opportunities post-EBAY separation — anticipating the upcoming EBAY separation, PayPal has been gradually trimming its exposure, while looking for serving other similar market places, generating $66.4B in TPV and posting 42% YOY growth from the top 20 market places (past 12 months).

PayPal has outperformed the broad markets, with its stock up 20% in the past 52 weeks. In just 2018 alone, the stock is up about 10%.

Ahead of the earnings report, a few other analysts weighed in on PayPal:

  • Nomura has a Buy rating and a $103 price target.
  • UBS Group has a Buy rating.
  • BMO Capital Markets has an Outperform rating with a $112 target.
  • Raymond James has an Outperform rating and a $108 price target.
  • Merrill Lynch has a Buy rating with a $102 price target.
  • KeyCorp has an Overweight rating with a $105 price target.

Shares of PayPal were last seen trading at $79.83, in a 52-week range of $66.16 to $93.70 and with a consensus analyst price target of $97.84.