PayPal (PYPL) investors might want to skip this first paragraph. Barely six weeks into 2022, and the shares have already shed 39% of their value, accelerating a slide which began midway through last year.
While the volatile environment hasn’t helped, the company’s latest earnings displays can shoulder most of the blame for the share price meltdown. And following a particularly disappointing outlook in the wake of Q4’s result’s, the stock delivered its worst daily performance ever.
Deutsche Bank’s Bryan Keane is not surprised that investor confidence is low. “Over the last two earnings reports, PYPL has taken down forward guidance with many investors wondering if the updated forward guidance is finally achievable,” the 5-star analyst explained.
That said, PYPL slashed its forecast for net new active accounts (NNAs) on the latest earnings report yet did not alter its long-term outlook for 2023-2035. As such, Keane wonders if the shortfall in accounts can be negated by share gains, engagement and increasing average revenue per user (ARPU).
So, can they? Based on Keane’s market share analysis, PayPal has “continued to gain share” and the 5-star analyst sees potential for growth to “remain elevated” given the ongoing share gains through PayPal’s “full suite of solutions and strategy to move up the sales funnel.”
Additionally, beyond the physical goods and travel/events eComm market, PayPal’s penetration rate remains low and still offers a “large opportunity.”
As for engagement, while net adds are anticipated to revert to pre-pandemic levels in FY23 and beyond, moving forward, PYPL expects engagement to “increase” from current levels.
Lastly, the roll out of the new super app and suite of products/services as well as the “purging of unprofitable accounts,” should prove beneficial to both engagement and ARPU.
Which all means Keane stays bullish, sticking with a Buy rating and $200 price target. Investors stand to take home about 75% gain, should the target be met over the next 12 months. (To watch Keane’s track record, click here)
What does the rest of the Street make of PYPL’s prospects? Based on 27 Buys, 9 Holds and 1 Sell, the analysts’ view is that this stock is a Moderate Buy. The forecast calls for 12-month gains of ~63%, given the average price target clocks in at $186.24. (See PayPal stock forecast 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.
