‘Buy the dip,’ Goldman Sachs says of PayPal stock | Top Vip News


Thursday is shaping up to be another bad day for PayPal (NASDAQ:PYPL), as the digital payments leader faces a drop of approximately 11% in its shares. Despite beating expectations for both revenue and profit in its 4Q23 report, PayPal saw a decline in active accounts. Additionally, the company’s forecasts fell short of expectations, contributing to investor disappointment.

In the quarter, revenue rose 8.1% year over year to $8 billion, $130 million above Street expectations. At the opposite end of the scale, adj. EPS of $1.48 beat analysts’ forecast by $0.12. There were other solid metrics. Total payment volume (TPV) saw an increase of 15% (13% FXN) to $409.8 billion, while payment transactions per active account increased 14% to 58.7.

However, on the negative front, total active accounts fell from 435 million at the end of 2022 to 426 million. And looking ahead, for 2024, the company expects adjusted earnings per share of ~$5.10, roughly the same as last year, and below Wall Street’s forecast of $5.53. For the first quarter, PayPal expects mid-single-digit EPS growth. That should take the figure to ~$1.23, below the consensus of $1.26.

This is a transition period at PayPal with new CEO Alex Chriss aiming to once again accelerate the company’s growth. Investors might be showing disappointment with how things are going so far, but Goldman Sachs analyst Michael Ng thinks the company is making the right noise and thinks the cautious outlook could eventually turn out to be a good thing.

“In our view,” the analyst said, “the quarter was relatively balanced with 2024E estimates that were sufficiently conservative and set PYPL up to potentially beat numbers for the full year thanks to better operating expense discipline and new product contributions.” (which is not reflected in the guidance.) We are also encouraged by PYPL’s new disclosures on POS growth (e.g. PSP, branded checkout and Venmo), the addition of SBC as an expense to the results adjusted as of 1Q24 and a commitment to return another $5 billion to shareholders through buybacks in 2024E.”

In summary, Ng reiterated his Buy rating on PayPal stock, stating: “We believe consumer confidence in the PayPal brand and PayPal’s continued investment in value-added features should support the current market share position of PYPL, with operating expense efficiencies (relative to historical levels) that should position PYPL for strong performance when e-commerce growth strengthens and returns to historical DD% growth rates.”

That Buy rating comes with a price target of $74 (up from $80), suggesting the stock will rise 32% over the next year. (To view Ng’s track record, click here)

Among Ng’s colleagues, PYPL bulls and conservatives are almost evenly matched. Based on 12 Buys and 13 Holds, the stock claims a Moderate Buy consensus rating. Following the average price target of $69.23, within a year the shares will change hands at a premium of ~24%. (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.

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