PayPal Stock Is A Buy According To Analysts
According to Goldman Sachs, shares of PayPal are a buy. PayPal, the parent company of digital payments company PayPal, has been in the news quite a bit lately. With news of a potential acquisition, investors have been keeping an eye on this company, and looking at the stock. On Tuesday, August 28, Goldman Sachs analyst Heather Cruttenden upgraded the stock to a Buy rating and set a price target of $83 per share. In a research note, she stated that: “We think PYPL’s risk-reward is now favorable on a risk-adjusted basis.” In addition to setting a target price, the analyst provided several other reasons for the upgrade. These include: “We believe PYPL’s risk-reward is now favorable on a risk-adjusted basis, as the company is well positioned to capitalize on new consumer adoption of digital payments and its product offerings are becoming more differentiated.” The analyst also mentioned that PayPal has completed its transition from a payments company to an e-commerce company. With many users shifting from desktop to mobile, the company has also launched mobile checkouts. The analyst is also optimistic about PayPal’s growth prospects in its new business verticals of peer-to-peer lending, digital media, and online services. To learn more about the analyst upgrades and price target, keep reading.
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What’s Driving the Upgrade?
The main reason behind the upgrade is the growth prospects of the company in its new business verticals. These include peer-to-peer lending, digital media and online services. With the growth prospects of these verticals, PayPal looks poised to take advantage of the shift to digital transactions. With the number of digital transactions growing, PayPal’s risk-reward is now favorable on a risk-adjusted basis.
PayPal Is Becoming An E-Commerce Giant
PayPal has been focusing on adding more services to its platform. With PayPal Receiving Shared Economy, PayPal has launched a new service that helps users get access to rental bikes and car sharing in 13 U.S. cities including San Francisco, Washington DC and Dallas. With the launch of this service, PayPal has become more than just a digital payments company. It is also becoming a leader in the shared economy. This would help it garner more customers and expand its business verticals. With PayPal Receiving Shared Economy, users will be able to book and pay for these cars through the service. This would help boost the company’s customer acquisition costs (CAC). In addition, it would help it expand its business verticals.
PayPal Stock Forecast for 2025
The profit growth of the company as well as the upbeat revenue outlook for the next few years plays a vital role in setting a price target for a stock. The profit growth has been strong for PayPal. After recording an annualized growth rate of 47% from 2011 to 2016, the company’s profit growth has been even stronger in 2017. In the first half of this year, the company’s profit rose by nearly 50%. In addition, the company’s revenue growth has been impressive in recent years. From fiscal year 2017 to fiscal year 2021, the company’s revenue is expected to rise by more than 20%. Given these factors, Goldman Sachs sees PayPal’s stock rising to around $83 per share by 2025. This would give investors a significant gain of almost 500% if they buy the shares today.
Risk-Reward Analysis
Due to the potential upside of buying PayPal shares at an upcoming price, the analyst has assigned a higher risk-reward to the stock. The analyst believes that the stock’s price is currently fair based on its risk-reward analysis. While the stock’s price is currently fair, the analyst believes that the stock’s price could rise further in the short-term. This is because the analyst sees a growth catalyst in the company’s new business verticals. Therefore, the analyst sees a higher risk in buying the shares at their current price. If the stock’s price does rise further, a trader may earn a significant profit by selling his shares at a higher price.
Bottom Line
According to Goldman Sachs, shares of PayPal are a buy. The analyst sees the stock’s price rising to around $83 per share by 2025. With this price target in mind, investors could potentially make a significant profit by buying shares of PayPal today.
