On Wednesday, Susquehanna maintained a Positive rating on PayPal (NASDAQ: PYPL) shares and increased the price target to $94.00 from the previous $83.00. The firm acknowledged PayPal's consistent ability to grow its transaction margin dollars, which saw an 8% increase this quarter. This performance is consistent with the previous quarter and represents an improvement over the first quarter and the last fiscal year.
PayPal's new management has been credited with delivering steady growth in transaction margin dollars. This growth has been a key performance indicator for the company, especially in the face of concerns that slowing revenue growth could potentially pressure earnings per share (EPS) for 2025.
Despite these concerns, the payments platform's Braintree service contributed positively to the transaction margins, and branded volumes exhibited robust growth of around 6%, matching the second quarter's performance.
The firm noted improvements in transaction margin dollar margins which are expected to have a downstream effect on the company's adjusted EBIT margin and EPS in 2026. While there is a moderation in the expectations for 2025, the outlook for 2026 shows signs of improvement. This positive outlook has led to the adjustment in PayPal's price target.
Susquehanna's analysis suggests that the concerns about a potential decline in EPS for 2025 may be offset by the company's strong performance in other areas. The firm has reiterated its confidence in PayPal's prospects, underlined by the upgraded price target.
Further details and insights from Susquehanna are anticipated to be provided in callback notes, which will be made available upon request later today. This follows the firm's practice of offering additional information and analysis to interested parties.
In other recent news, PayPal Holdings Inc (NASDAQ:PYPL). reported a 6% increase in revenue to $7.85 billion and a 14% rise in adjusted profits to $1.23 billion in the third quarter. The company has been making significant strides in its business operations, reporting an 11% increase in total payment volume and a 9% rise in revenue on a currency-neutral basis.
Non-GAAP earnings per share also saw a substantial 36% year-over-year increase. Despite these positive developments, PayPal has announced plans to reduce its global workforce by 9%, equating to approximately 2,500 jobs, due to uncertain economic conditions.
Analyst firms have provided mixed feedback on PayPal's performance and future prospects. Canaccord Genuity and Mizuho Securities maintained their positive stance, raising their price targets to $96 and $100 respectively, while TD Cowen increased its target to $78 but maintained a Hold rating. Goldman Sachs (NYSE:GS) reaffirmed its Buy rating on PayPal but noted the company's conservative fourth-quarter revenue forecast.
In terms of strategic partnerships, PayPal has integrated with Amazon (NASDAQ:AMZN)'s 'Buy with Prime' service and collaborated with Adyen (AS:ADYEN) to introduce Fastlane, a feature designed to streamline online transactions. The company has also expanded its cryptocurrency services to U.S. business accounts, allowing them to buy, hold, and sell various cryptocurrencies. These are the recent developments for PayPal.
InvestingPro Insights
PayPal's recent performance and Susquehanna's positive outlook are further supported by real-time data from InvestingPro. The company's market cap stands at an impressive $80.76 billion, reflecting its significant position in the financial services industry. PayPal's revenue growth of 8.66% over the last twelve months aligns with Susquehanna's observations on the company's consistent growth in transaction margin dollars.
InvestingPro Tips highlight that PayPal has been aggressively buying back shares, which could potentially boost earnings per share and shareholder value. This strategy may help address concerns about EPS pressure in 2025, as mentioned in Susquehanna's analysis. Additionally, PayPal's strong return over the last three months, with a price total return of 25.44%, corroborates the positive sentiment expressed in the article.
It's worth noting that PayPal is trading at a P/E ratio of 19.91, which InvestingPro considers high relative to near-term earnings growth. This valuation metric could be an important factor for investors to consider alongside the positive growth trends highlighted by Susquehanna.
For readers interested in a more comprehensive analysis, InvestingPro offers 8 additional tips for PayPal, providing a deeper understanding of the company's financial health and market position.
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