The PayPal Analyst
Jeff Cantwell upgraded PayPal from Neutral to Buy with a new $133 price target.
The PayPal Thesis
PayPal's fourth-quarter report and management's updated outlook include three takeaways that justify a bullish stance on the stock, Cantwell said in a Friday upgrade note. (See his track record here.)
First, the recent acquisition of Honey could prove to be a "significant" driver for PayPal, the analyst said. The money-saving application could generate $334 million in revenue for PayPal in 2021 and $418 million in 2021, he said.
In addition, the deal instantly adds Honey's 17 million monthly active users to its ecosystem and moves PayPal "up the consumer purchase funnel," Cantwell said.
Second, PayPal showed it has a notable opportunity in China, the analyst said. PayPal highlighted some prospects including cross-border e-commerce and in-store use of the PayPal mobile wallet.
China could generate an extra $333 million in revenue in 2022 for PayPal, or an incremental 1.3% to companywide revenue growth, according to Guggenheim.
Finally, the Street's outlook for PayPal looks to be conservative after management highlighted its underlying core strength on the conference call , Cantwell said.
Coupled with benefits from the Honey acquisition and growth prospects in China, PayPal should be in a position to report upside to consensus EPS estimates in 2022 and 2021, he said.
PayPal Price Action
PayPal shares were down 1.77% at $115.05 at the time of publication Friday.