Bank of America analyst Jason Kupferberg raised the price target on PayPal (NASDAQ:PYPL) to $118.00 per share from the prior $107.00.
The analyst expects PYPL to deliver on Q1 expectations with the Street calling for revenue growth of 6.2% and EPS of $0.88. However, he sees risk to the FY22 guidance.
"Management also said on the 4Q21 call that to achieve the upper part of the ˜15-17% revenue growth guidance range for '22, the macro backdrop would need to improve. But that was before inflation worsened and the Russia/Ukraine war broke out. As a result, we think the risk of PYPL falling short of its '22 guidance has increased, as macro headwinds may simply not enable the company to achieve its planned 2H trajectory of top-line acceleration (ie, targeting 20%+ revenue growth in 4Q), as discretionary e-commerce spending among the lower-income cohort could face incremental pressure," Kupferberg said in a client note.
For these reasons, and especially due to limited visibility, Kupferberg said he remains Neutral-rated on PYPL shares.
When it comes to the recovery, Kupferberg says that the success of new initiatives will ultimately be a major determinant of PYPLs ability to achieve its stated target for a 20% revenue CAGR from 22-˜25.
As a reminder, PayPal introduced a set of new initiatives to fuel faster growth, including Pay in 4, crypto services, and new features for Venmo.
By Senad Karaahmetovic