In the wake of 2022’s bear market, not many were expecting the bull market that defined the first half of the year to take place. But that was not the only surprise on offer.
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Also contrasting sharply with expectations set out at the start of 2023, Deutsche Bank analyst Bryan Keane notes e-commerce volumes have been “far more robust than expected,” and with all relevant metrics indicating resilience in online spending, this strength continued into 3Q23.
As such, with PayPal’s (NASDAQ:PYPL) Q3 earnings round the corner (slated for November 1), Keane is optimistic the digital payments leader can deliver the goods. “We see slight upside heading into PYPL’s 3Q23 print and expect the company to beat consensus expectations on TPV and revenue by 1-2 pts,” said the analyst.
However, this isn’t the central focus when PayPal reports its latest financial statement. For new CEO, Alex Chriss, who took hold of the reins on September 27, this will be his first earnings call, and therefore, of greater importance will be what he has to say about the “multiple areas that need to be fixed in order to turn the business around.”
Chief among these concerns is the net transaction take rate, which Keane believes best reflects the overall health of PayPal’s payment business and which has seen a substantial decline in recent years.
Furthermore, Chriss will have to tackle important issues raised by investors, including Branded share loss, the slower-than-expected progress of Pay with Venmo, and the absence of a successful loyalty program.
“In our view,” says Keane, “the new CEO should highly consider lowering adj margin expansion and EPS expectations for FY24 in order to make the necessary investments to fix the business. We eagerly await his opening comments on the strategic direction on how to turn PYPL around.”
Bottom line, while Keane remains on board and maintains a Buy rating on PayPal shares, due to “uncertainty surrounding the fundamentals and outlook,” he lowers his price target from $80 to $74. Nevertheless, there’s still upside of 38% from current levels. (To watch Keane’s track record, click here)
Elsewhere on the Street, the stock receives an additional 19 Buys and 12 Holds, for a Moderate Buy consensus rating. The average target is higher than Keane’s objective; at $83.66, the figure suggests shares will surge ~56% in the year ahead. (See PayPal stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
