By Senad Karaahmetovic
Bank of America analysts weighed in positively on PayPal (NASDAQ:PYPL) shares ahead of the company’s Q3 earnings report next month.
Analysts project PYPL will deliver “in-line-ish” revenues for Q3 and sees a modest upside to Street estimates as far as EPS is concerned.
“In terms of guidance, we think the 2022 const-curr outlook of ~11% growth is potentially achievable, albeit with a modest downward bias due to deteriorating macro, particularly in UK/Europe (~30-35% of revs). On the plus side, other value-added services (OVAS) revs (8% of total) is likely be trending better than plan given higher interest rates,” they said in a client note.
The analysts are also positive on the prospects of PayPal achieving upside to margins and EPS due to the company’s cost controls and involvement of activist Elliott Management. This should also help get PayPal some downside protection to 2023 non-GAAP EPS.
Overall, analysts believe the recent PYPL stock selloff, in response to user policy “error”, is “overdone.”
“We believe there is room for sentiment to improve among long-only investors, and Elliot’s involvement likely puts somewhat of a floor on the stock. PYPL trades at 17.3x our above-Street non-GAAP ’23 EPS, which in our view is attractive risk/reward. Potential catalysts include 2H22 top-line re-acceleration (lapping EBAY, easier e-comm comps) and 1Q23 Analyst Day (expect detailed multi-year capital deployment strategy),” they concluded.
BofA’s new price target of $112 per share (down from $114) implies an upside potential of about 35%.