Compass Point Tranfers, Downgrades PayPal (PYPL) to Neutral
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Compass Point downgraded PayPal (NASDAQ: PYPL) from Buy to Neutral with a price target of $40.00 (from $41.00) in transferred coverage.
Analyst John Williams commented, "We transfer coverage of PYPL and downgrade the shares to Neutral from Buy, with a new $40 (-$1) price target. With the shares +30% from their recent lows, we see the current risk/reward as balanced. We believe that (1) PYPL is a clear FinTech disruptor, though the stock’s multiple and performance suggest to us that near-term estimate upside is likely well-understood and priced into the stock; (2) an acquisition of PYPL is unlikely near-term given that such a deal would be quite large (likely $55bn+) and few buyers could pay that price—indeed, we think a rewards-centric JV with AXP is far more likely given management’s AXP ties); (3) investor skepticism remains high—but we see much runway for growth and share gains over the next 3-5 years given PYPL’s large/active user base, still-small market share, and strong secular tailwinds; and (4) independence should be good for PYPL, though capital allocation discipline is a concern given the expensive (though strategically smart) XOOM acquisition and the company’s continued focus on acquisitions in a seller’s market."
Shares of PayPal closed at $38.64 yesterday.
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