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Citi Raises Target On PayPal Ahead Of Wednesday's Q1 Results

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Citi’s Ashwin Shirvaikar maintained a Buy rating on the company, while raising the price target from $41 to $46.

1Q Beat?

Shirvaikar expects PayPal Holdings to report robust 1Q16 results, with potential for a beat quarter.

“We continue to view PYPL as the best way to play the e-commerce/m-commerce trend. PayPal's recently publicized success with the rapid ramp of One Touch is an example of this momentum,” the analyst mentioned.

On the whole, Shirvaikar expects the commentary on the quarter and the full-year guidance to be positive, although 2Q16 is likely to be a low point for PayPal Holdings’ revenue and earnings for 2016, “reflecting the lapping of the Synchrony credit receivable sale, but this was previously signaled.”

Visa/PayPal

Shirvaikar believes that PayPal Holdings is possibly negotiating with Visa Inc V 2.41% and a settlement could lead to an economic cost for the latter company.

The analyst believes that a part of this cost has already been accounted for in the company’s FY16 guidance.

“The stock impact is likely to be balanced by investors' view vs. the magnitude of the economic cost vs. the removal of the obvious overhang,” Shirvaikar stated.

The analyst expects the company to provide “prudently conservative” guidance for 2016, with management potentially positively narrowing the EPS guidance for the full year or raising its midpoint.

DateFirmActionFromTo
Apr 2016CitigroupMaintainsBuy
Apr 2016Compass PointInitiates Coverage onNeutral
Mar 2016BernsteinInitiates Coverage onMarket Perform

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