Analysts weighed in on internet giant Yahoo! Inc. (NASDAQ:YHOO) and electronic payment company Paypal Holdings Inc (NASDAQ:PYPL) after earnings and a Q&A session, respectively. While one analyst remains bullish on Yahoo’s near term outlook following earnings, the other cites positive sentiment on Paypal due to commentary by the CFO at a Q&A session.
Cantor analyst Youssef Squali weighed in on Yahoo after the company posted its Q4:2015 earnings. The good news included better than expected revenue and margins due to strength in the company’s advertising platform, Gemini, as well as programmatic ads. However, the company posted disappointing guidance for the 1Q:16 and FY2016, which “implies yet another transition year for Yahoo at a time when investor’s patience has largely ran out.”
This quarter, the company announced the possibility of a reverse spinoff, meaning that Yahoo! is not selling its stake in Alibaba and would separate all of its core assets from the stake instead. The analyst believes that Yahoo’s decision to go through with the reverse spinoff while exploring “strategic alternatives,” potentially laying off 15% of its workforce, and closing 5 offices will give the company “some breathing room for the short term.” He also mentions a few possible buyers for the company’s core business, such as Verizon ATT and Comcast.
On February 3, 2016, the analyst reiterated a Buy rating on the company with a $51 price target. Youssef Squali is ranked #32 out of 3,689 analysts on TipRanks. He has a 56% success rate recommending stocks with an average return of 12.8% per recommendation.
According to TipRanks’ statistics, of the 20 analysts who have rated the company in the past 3 months, 9 gave a Buy rating, 1 gave a Sell rating, while 10 remain on the sidelines. The average 12-month price target for the stock is $37.24, marking a 34% upside from where shares last closed.
Paypal Holdings Inc
Analyst Daniel Perlin of RBC Capital recently weighed in on PayPal after a Q&A session with CFO John Rainey following Q4 earnings. The meeting highlighted a few key points, the first of which is the company’s relationship with Visa. According to the analyst, the two main concerns regarding Visa include PayPal’s favoring of ACH, an electronic network for financial transactions that processes large batches of credit and debit transactions, instead of “network branded credit” and sharing of consumer data with credit card companies. Addressing these concerns, Rainey indicated the company is “committed to an open dialogue” and remains positive even if a solution is not reached.
Another topic of the meeting was the earnings report in respect to TPV (total payment volume) growth. Perlin stated that this growth “can offset the pace of take-rate decline to drive revenue growth.” The take rate is the amount of money Paypal keeps from each transaction, which is declining as a result of the company working with big volume clients who have more bargaining power in terms of lowering rates. According to the analyst, this balance is further encouraged by an increase in consumer engagement this quarter due to a “mix-shift to largest merchants” and the introduction of OneTouch, where consumers can use Paypal at traditional stores.
The third topic of the meeting was the CFO’s role in operating leverage, as Rainey stated that the company hired him to enhance this metric, although y/y margin guidance for 2016 “remains relatively flat.” Finally, the analyst points to M&A and “internal investments” for the company’s capital allocation, “as share repurchases are largely designed to offset share creep from stock compensation.” The analyst concludes by stating that the CFO believes the current share price is undervalued despite FY16 guidance.
On February 2, 2016, Perlin reiterated an Outperform rating on the company with a $42 price target.
Daniel Perlin has a 72% success rate recommending stocks with an average return of 14.4% per recommendation on TipRanks.
Out of the 16 analysts who have rated the company in the past 3 months on TipRanks, 14 gave a Buy rating, 1 gave a Sell rating, and 1 remains on the sidelines. The average 12-month price target for the stock is $41.87, marking a 13% upside from where shares last closed.