Despite the boom in e-commerce, many industry players have failed to live up to earnings expectations lately. This is partly due to the tough comparisons they face in the home run Q1 that many have had, and partly because all the booms have to cool off eventually.
One such company in a related industry, PayPal Holdings, Inc. (PYPL), fell into this unfortunate category. The payment processing platform beat earnings but missed the Q3 outlook for both revenue and EPS. (To see PayPal Stock Charts on TipRanks)
Detailing this development is: Trevor Williams of Jefferies Group, who wrote that while PayPal has forecast a quiet third quarter, it is not overly concerned and so remains optimistic.
Williams advised the stock to buy and set a price target of $350 per share. This target represents a potential 12-month growth rate of 27.03%.
The analyst explained that despite Wall Street’s lack of consensus expectations on guidance, he believes PayPal was dragged down in large part because of one factor: eBay. The e-commerce retailer has moved its managed payments platform, which has reduced volumes for PayPal.
Excluding eBay’s impediment, Williams calculates that revenues would have increased an additional 37% year-over-year.
The analyst anticipates a rise in the stock and is confident that PayPal will see strong volumes as a return to leisure activities such as travel and events that consumers have been craving for more than a year. In addition, the third quarter will see some back-to-school and vacation spending, which Williams is excited about.
Stocks are currently trading near all-time highs, but Williams doesn’t see this as a challenge to rise.
On TipRanks, PYPL has an analyst consensus of Strong Buy, based on 25 Buy and 3 Hold ratings. The analyst average price target is $332.59, reflecting a potential 12-month increase rate of 20.71%. PYPL closed trading Friday at a price of $275.53 per share.
Disclaimer: The opinions expressed in this article are those of the featured analyst only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.