UPDATE: BofA Securities Upgrades PayPal (PYPL) to Buy
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BofA Securities analyst Jason Kupferberg upgraded PayPal (NASDAQ: PYPL) from Neutral to Buy with a price target of $114.00.
The analyst comments "For the first time in about a year, we see upside potential to out year consensus EPS estimates for PYPL, which we expect will be driven primarily by additional cost efficiencies, and to some degree by share buybacks. We believe these initiatives are likely to be pushed for by activist Elliott Management (who recently disclosed a 2% stake in PYPL), and we note PYPL’s new CFO, Blake Jorgensen, has a track record of executing well on cost/margin initiatives. Based on potential $5+ of EPS power next year, PYPL trades at 18.4x P/E, which in our view represents attractive risk/reward, as Elliott’s involvement likely provides support to the stock. Potential catalysts include 2H top-line re-acceleration (lapping EBAY, easier e-comm comps) and 1Q23 Analyst Day, where we expect PYPL will discuss more detailed multi-year capital deployment strategy, reflecting increased return of cash to shareholders. Upgrade to Buy from Neutral and raise PO to $114 from $94 based on a 50/50 blend of 22x our new ’23 EPS (up from 20x prior given stabilization in quarterly execution, growth prospects, and margin re-acceleration) and our DCF model (which now includes more bullish out year margin assumptions)."
Shares of PayPal closed at $91.80 yesterday.
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