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PayPal Rises After BofA Upgrade to Buy, Analyst Sees Upside to EPS Estimates

2022.08.31 17:17

PayPal Rises After BofA Upgrade to Buy, Analyst Sees Upside to EPS Estimates
PayPal Rises After BofA Upgrade to Buy, Analyst Sees Upside to EPS Estimates

By Senad Karaahmetovic

Shares of PayPal (NASDAQ:PYPL) are up over 4% after a Bank of America analyst upgraded to Buy from Neutral and hiked the price target to $114 from $94.

The analyst highlights that he sees upside potential to out-year consensus EPS estimates “for the first time in about a year.” The upside “will be driven primarily by additional cost efficiencies, and to some degree by share buybacks.”

The positive updates are a result of activities initiated by activist investor Elliott Management, who has a 2% stake in the fintech company.

“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,” the analyst told clients in a note.

The analyst is also positive about PYPL’s new CFO, Blake Jorgensen, who “has a track record of executing well on cost/margin initiatives.”

As far as catalysts are concerned, shares could re-rate higher on 2H top-line re-acceleration and the Analyst Day, which is due in the first quarter of next year.

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