PayPal (NASDAQ:PYPL) is gaining momentum as Wall Street turns bullish. Both Bernstein and Argus have upgraded the stock, citing the company's strong turnaround efforts and promising growth prospects.
The catalyst for this upgrade is PayPal's impressive turnaround in transaction gross profit. “We are encouraged by improved transaction gross profit performance from positive branded growth, Braintree pricing initiatives, and Venmo monetization,” analysts said.
Bernstein also flagged the company's improved product momentum and overall execution under new leadership.
“PayPal is accepted at more than 75 of the top 100 retailers in the U.S., and we expect even greater penetration in the next year,” analysts at Argus said in a note.
The upgrade follows PayPal’s better-than-expected second-quarter earnings, where the company reported adjusted EPS of $1.19, surpassing analyst estimates. Additionally, management's raised full-year earnings guidance signals a more optimistic outlook.
This growth is fueled by a combination of factors: the new management team's strategic initiatives, such as Fastlane and Braintree enhancements, have invigorated product momentum; coupled with this, PayPal's valuation appears compelling at a forward PE of 14x, given its robust free cash flow generation.
Furthermore, the company's diverse portfolio, including its strong foothold in eCommerce and the potential to expand into advertising and commerce platforms, presents significant upside opportunities. While macroeconomic headwinds and competition persist, PayPal's recent performance and strategic positioning make it an enticing investment prospect.
While economic uncertainties and competitive challenges persist, Bernstein believes that PayPal's recent performance and strategic positioning make it a compelling investment opportunity.
Argus expects PayPal to deliver steady long-term growth in payment volumes, driven by increased merchant adoption, mobile payments, and higher transaction values. The brokerage believes the shares offer value at current levels, given the company’s turnaround progress and strong competitive position.