On Wednesday, BMO Capital Markets adjusted its outlook on PayPal Holdings Inc . (NASDAQ:PYPL), citing the company's solid third-quarter performance. The firm raised its price target on the stock to $82.00 from the previous $73.00, while maintaining a Market Perform rating.
The decision to increase the price target followed PayPal's third-quarter results, which showed a quarter-over-quarter acceleration in Total Payment Volume (TPV) growth. BMO Capital highlighted several factors contributing to this positive momentum, although it noted an expectation for TPV growth to slow down in the near term, partially due to diminishing interest income tailwinds.
BMO Capital also revised its earnings per share (EPS) estimates for PayPal upwards by 10-12%, acknowledging that their initial figures were below the consensus. This revision reflects a more optimistic view of the company's earnings potential.
Despite the positive third-quarter results and the raised EPS estimates, BMO Capital expressed a cautious stance on PayPal's long-term outlook. The firm pointed to PayPal's initial guidance for the year 2025, which suggests sustained momentum in the business. However, BMO Capital is looking for more evidence of a meaningful acceleration in Branded Checkout TPV growth before adopting a more bullish position on the stock.
PayPal's financial performance and future prospects remain a focal point for investors as the company navigates the dynamic digital payments landscape. BMO Capital's updated price target reflects a balance between recognition of recent successes and a wait-and-see approach to PayPal's longer-term growth trajectory.
In other recent news, PayPal Holdings Inc. reported a 6% rise in revenue to $7.85 billion and a 14% increase in adjusted profits to $1.23 billion in the third quarter. The company's transaction margin dollars saw an 8% increase, contributing positively to the company's performance.
Susquehanna, Canaccord Genuity, and Mizuho Securities maintained their positive stance on PayPal, raising their price targets, while TD Cowen increased its target but maintained a Hold rating. Despite a conservative fourth-quarter revenue forecast, PayPal's third-quarter performance showed resilience with an 11% increase in total payment volume and a 9% rise in revenue on a currency-neutral basis.
However, due to uncertain economic conditions, PayPal plans to reduce its global workforce by 9%, equating to approximately 2,500 jobs. The company has also expanded its cryptocurrency services to U.S. business accounts and integrated with Amazon (NASDAQ:AMZN)'s 'Buy with Prime' service and collaborated with Adyen (AS:ADYEN) to introduce Fastlane.
InvestingPro Insights
PayPal's recent performance aligns with several key metrics and insights from InvestingPro. The company's market cap stands at $80.76 billion, reflecting its significant presence in the financial services industry. PayPal's revenue growth of 8.66% over the last twelve months as of Q2 2024 supports BMO Capital's observation of accelerating Total Payment Volume growth.
InvestingPro Tips highlight PayPal's strong return over the last three months, which is corroborated by the impressive 25.44% price total return over the same period. This recent momentum may have contributed to BMO Capital's decision to raise its price target.
Additionally, PayPal's P/E ratio of 19.91 suggests that the stock is trading at a relatively moderate valuation compared to its earnings. This could be seen as a positive factor for investors considering the company's market position and growth prospects.
For readers seeking a more comprehensive analysis, InvestingPro offers 7 additional tips on PayPal, providing deeper insights into the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.