Despite the boom in ecommerce, many industry players have missed meeting earnings expectations as of late. This is partly due to the difficult comparisons they face from the home-run Q1 many have had, and partly because all booms must cool off eventually.
One such company in a related industry, PayPal Holdings, Inc. (PYPL), fell into this unfortunate category. The payment processing platform beat on earnings, but missed on Q3 outlook for both revenue and EPS. (See PayPal stock charts on TipRanks)
Detailing this development is Trevor Williams of Jefferies Group, who wrote that although PayPal has forecasted an uneventful Q3, he is not too concerned, and thus remains bullish.
Williams assigned a Buy rating on the stock, and declared a price target of $350 per share. This target represents a potential 12-month upside of 27.03%.
The analyst explained that despite missing Wall Street consensus expectations on guidance, he believes PayPal was mostly dragged down due to one factor: eBay. The ecommerce retailer has shifted its managed payments platform, and that has reduced volumes for PayPal.
If one is to omit eBay’s drag, Williams calculates revenues would have grown an additional 37% year-over-year.
Anticipating upside for the stock, the analyst is confident that PayPal will see strong volumes from a return in leisure spending, such as travel and events for which consumers have been hungering over for more than a year. Additionally, Q3 will see back-to-school and holiday spending, about which Williams is enthused.
Shares are currently trading near all-time highs, but Williams does not see this as a challenge to upside.
On TipRanks, PYPL has an analyst rating consensus of Strong Buy, based on 25 Buy and 3 Hold ratings. The average analyst price target is $332.59, reflecting a potential 12-month upside of 20.71%. PYPL closed trading Friday at a price of $275.53 per share.
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.