Top analysts provide their insights on major tech players Apple Inc. (NASDAQ:AAPL) and Paypal Holdings Inc (NASDAQ:PYPL) in regards to Apple’s new investment in Didi Chuxing and Paypal’s upcoming analyst day. Both cite short and long term catalysts for the stocks, while reiterating bullish stances. Let’s take a closer look:
Top analyst Kathryn Huberty of Morgan Stanley weighed in on Apple after the company announced a $1 billion investment in Didi Chuxing, a Chinese ride sharing business. Although unexpected, the analyst believes this was the right strategic move for the company. She states, “We see positive near- and long-term implications from Apple’s unexpected $1B investment in Didi Chuxing. Apple can learn more about the services business, especially in an important market like China, and maybe one day deploy its own cars as-a-service.”
The analyst notes that the acquisition appeals to both value investors, as $1 billion is not much for Apple, and growth investors considering the long term “trans-formative opportunities.” The analyst also notes that through the acquisition, the company could learn how to better integrate its technology into Chinese products as well as the Chinese market overall, highlighting the potential for to develop a car for this market. She states, “An Apple autonomous car fleet paired with a leading (~87% market share in China) car sharing service creates a large addressable market.” The analyst further explains that the Chinese ride sharing market represents a $143 billion opportunity for the company by 2020, growing to $500 by 2030.
Moreover, the analyst comments on Apple’s overall opportunity in China, noting that the country will soon represent the company’s largest market. Due to a high U.S. tax rate, the analyst claims it makes more sense for Apple to invest overseas while returning similar if not higher returns for investors. The analyst also points to Apple’s successful experience with “prescient and symbiotic investments.” Regarding the smartphone market, Huberty points out that 400 million adults in urban China do not own an iPhone vs. only 150 million in the U.S. The analyst believes mobile and ride-sharing presents synergies for the company. She explains, “A successful shared mobility strategy could increase both Apple’s wallet share of existing customers and share of the remaining population in China [as] what would likely be an expensive vehicle is made more affordable through a shared platform.” The analyst predicts this trend will gain popularity in other countries as well.
The analyst cites an increasing number of vehicle hours per year and total passenger vehicle hours increasing, believing the acquisition taps into this trend. She states, “Liberating this time through shared and autonomous technology and business models can offer a variety of content and service opportunities for firms such as Apple to monetize.” Furthermore, with such a high population, pollution and traffic issues, and the desire to own a car, the analyst believes China is “China as proactively encouraging the development and commercialization of shared/autonomous technology faster than any other region.” While more traditional car manufacturers express doubt regarding adoption of autonomous driving, the analyst believes “the time horizon of the first announced autonomous cities may be sooner than the market realizes.”
The analyst reiterates an Outperform rating on the company with a $120 price target.
Katy Huberty is ranked #109 out of 3,910 analysts on TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform. Huberty has a 58% success rate recommending stocks with an average return of 13.6% per recommendation.
According to TipRanks, out of all the analysts who have rated the stock in the past 3 months, 86% of analysts are bullish, 3% are bearish, and 11% remain on the sidelines. The average 12-month price target for the stock is $126.73, marking a 35% upside from where shares last closed.
Paypal Holdings Inc
Top RBC Capital analyst Mark Mahaney provided his expectations going into Paypal’s Analyst Day scheduled May 18. The analyst highlights three topics that he believes the company will elaborate on. First, Mahaney expects the company to provide more clarity on its shift to mobile, focusing on Braintree. Second, the Mahaney believes PayPal will provide an update on plans to monetize and expand its Venmo application to a broader customer base. Finally, the analyst discusses “democratization” believing Paypal plays an important role in “acting as the agnostic third-party to help drive financial inclusion to the masses vs. just the mass affluent on a global basis.”
The analyst also believes Paypal will touch on the size of its credit, the impact on take rate if the company implements a pass-through wallet, tokenization, its “physical world strategy”, talks with Visa, its transaction margin declines, long term margin opportunities, debit vs. ACH in terms of funding, and details of the FTC investigation.
Overall, Mahaney believes Paypal is well positioned in the digital commerce industry, citing a “leading global position in ecommerce payments. He is also bullish on the company’s mobile growth, expanding margins, and “the ‘secret sauce’ of Venmo any Paypal credit allowing the company to increase the profitability of transactions inside the PYPL network.”
Mahaney reiterates his Outperform rating on the company with a $46 price target.
Mark Mahaney is ranked #6 out of 3,910 analysts on TipRanks. He has a 61% success rate recommending stocks with an average return of 18.1% per recommendation.
According to TipRanks, out of all the analysts who have rated the company in the past 3 months, 60% are bullish, 4% are bearish, and 36% remain on the sidelines. The average 12-month price target for the stock is $46.00, marking a 17% upside from where shares last closed.