Nomura Analyst is Confident About Their High Targets for Paypal (PYPL)

By Carrie Williams

Paypal logoIn a research report released today, Nomura analyst Bill Carcache maintained a Buy rating and a $54 price target on the popular online payment service Paypal Holdings Inc. (NASDAQ: PYPL). This price target is an upside of 29.5% from the current price of $41.66. Carcache is a five-star analyst with a 77% success rate and 11.8% average return and is ranked #78 among the 4178 analysts according to his track-record by TipRanks.com.

After a recent meeting with Paypal’s management team, the brokerage firm reported that they felt a greater conviction in their belief that PYPL would report EPS growth of high teens to low 20% for years to come, thereby benefiting the shareholders due to the compounding effect. Consequently, Bill Carcache initiated a 2018 EPS estimate of $2.14 for Paypal, implying a 20% YoY growth. This EPS estimate is a street high for 2018.

In addition, he reaffirmed his earlier Street-high estimates for 2016 (EPS at $1.49) as well as 2017 (EPS at $1.79) for Paypal Holdings. Carcache also expressed confidence that the consensus estimates for PYPL would be revised by the experts to reflect Nomura’s estimates in the next few quarters, driving Paypal’s performance further ahead. Paypal had announced its 3Q16 results on October 20. The company had reported a revenue of $2.67 billion (+18.1% YoY) which beat estimates by $20 million, and an in-line EPS of $0.35.

Paypal was recently given the green signal by Facebook as a payment option for U.S. users across its various commerce services, including Messenger. Paypal had also extended payment integrations with Quickbooks Online (INTU) in Australia last month.

However, the current star of Paypal’s portfolio seems to be the free digital wallet ‘Venmo’. Venmo is used for small cashless transfers and is typically used by youngsters for reimbursing their share of movie ticket or dinner, or even for paying a portion of the rent. This popular payments app of Paypal is reported to be on track to process $20 billion in payments per year, as per CEO Dan Schulman. Venmo was a part of Paypal’s $800 million acquisition of Braintree in 2014.

The share prices of Paypal had reached new 52-week high recently with high volumes after breaking important resistance levels and currently seems to be bouncing upwards from its 50-day SMA of $40.13 after a correction.

Based on 20 analysts offering recommendations on PayPal in the past three months, the consensus rating on the stock is Moderate Buy, with an average price target of $46.85. The average price target is a 12.57% upside from the current levels.