Jefferies believes Paypal Holdings Inc
Analysts Jason Kupferberg, Brian Fitzgerald and Ryan Cary think that PayPal "is a must-own stock," citing its unique position. The comments came on the back of the company providing revenue outlook for the three-year period ending 2019. The revised forecast of 16 –17 percent is higher than the 15 percent indicated earlier.
The brokerage believes PayPal expects a stable to up operating margin, which is a real positive from the earnings announcement. Although there is no change from the earlier forecast, the important aspect is that the guidance removed any concerns on the unfavorable margin impact due to the recent Visa–MasterCard alliance.
In a research note, Jefferies said, "PYPL provided an initial high-level look at 2017 guidance, which calls for 16–17 percent const-curr revenue growth (JEFe/Street=17.4 percent/16.3 percent) and flat y/y operating margins vs. JEFe down 50 bps and consensus down 10 bps. The '17 guide assumes very little top-line contribution from the V/MA deals, as consumer choice rolls out more broadly next year."
The brokerage cited four key factors for viewing PayPal as a scarce investment opportunity:
- Expected top-line growth of high-teens.
- Underlying margin improvement.
- Pure-player with ability to take share.
- Strong global brand.
The firm has a Buy rating and a target price of $48.00 on the stock.
At last check, the stock traded up by 4.27 percent to $41.80 in Friday's pre-market session.
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