Top analysts provide insights on Dutch chip maker NXP Semiconductors NV (NASDAQ:NXPI) and online payment giant Paypal Holdings Inc (NASDAQ:PYPL) prior to Q1 earnings from each. While one analyst predicts short and long-term growth for NXPI, the other believes Paypal’s near-term success is not enough to swim against competition long-term.
NXP Semiconductors NV
Analyst Rick Schafer of Oppenheimer provided his insight on NXPI’s upcoming Q1:16 earnings set to release this evening. The analyst expects sales of $2.21 billion and EPS of $1.10, in line with consensus. Despite “well-known Apple-related weakness/channel inventory reduction efforts” in the first half of the year, the analyst has high hopes that its Auto segment “should be a bright spot” this quarter, making up for any losses. He explains, “As the auto market’s No.1 semi supplier, NXPI is in our view ideally positioned in one of the longest tailed growth stories in semis. We believe semi content growth likely continues to outpace auto units by 3x+ annually.” Furthermore, the analyst predicts Y/y growth for this segment in the mid-single digits due to the synergies resulting from the FSL merger. He explains, “We see positive tailwinds for Auto as NXPI capitalizes on FSL cross-selling opportunities and overall semi content growth trends.”
Commenting on the company’s de-leveraging initiatives, the analyst notes FCF of between $1.8-$2 billion for CY2016 and sees “considerable opportunity” to increase EPS by returning FCF through buybacks. He notes, “Combined with synergies and deleveraging, we see room for 20%+ EPS accretion long term.”
The analyst reiterates his Outperform rating on the stock and $100 price target.
Rick Schafer is ranked #15 out of 3,907 analysts on TipRanks. The analyst has a 69% success rate recommending stocks with an average return of 16.1% per recommendation.
As of this writing, all the analysts who have rated NXPI in the last 3 months gave a Buy rating. The average 12-month price target for the stock is $106.20, marking a 29% upside from current levels.
Paypal Holdings Inc
Piper Jaffray’s top analyst Gene Munster commented on PayPal ahead of the firm’s 1Q earnings with mixed views. Munster predicts the company will post revenues of $2.516 billion and EPS of $0.36, slightly above consensus of $2.5 billion and $0.35, respectively. He attributes this slight predicted earnings win to “solid” global constant currency trends and easing FX headwinds. Also, the analyst notes that Paypal has slightly beat EPS consensus the past few quarters with Q1 likely to reflect favorable digital payment volume growth trends. However, Munster mentions company guidance which predicts revenue growth declines of 6% “due to the lapping of the sale of its credit receivables and amended SYF agreement last year.”
Munster predicts success for both Braintree and Venmo in terms of merchant processing volume and P2P volume growth, respectively. Despite expected Venmo monetization updates, the analyst remains “skeptical of the scalable value proposition to consumers and merchants” though notes favorable uptake of One Touch by both merchants and consumers. Although Munster sees “the long-term XOOM-PYPL synergy potential,” he believes it “it will be difficult for PYPL to scale an in-store digital payment solution.” Still, the analyst will look for any updates on the strategic agreement with FDC in the q1 report.
Ultimately, the analyst believes the company cannot maintain its lead market share in the digital payment solution industry amid rising competition from the likes of Visa, Mastercard, Apple Pay, and Samsung Pay. The analyst believes the 4 digital payment channels (desktop browser, mobile browser, in-app, and in-store) are converging, threatening the future of the company. He explains, “We see that convergence posing a threat to PYPL’s long-term growth and economics, as we believe the other solutions may never intend to derive economics directly from their digital payment solutions.”
The analyst reiterates his Underweight rating on shares with a $33 price target. Gene Munster is ranked #4 out of 3,907 analysts on TipRanks. He has a 64% success rate and average return of 19% per recommendation.
According to TipRanks, out of all the analysts who have rated the company in the past 3 months, 58% gave a Buy rating, 5% gave a Sell rating, and 37% remain on the sidelines. The average 12-month price target for the stock is $420.05, marking a 5% upside from where shares last closed.