Baird top analyst Colin Sebastian provides commentary on shares of Paypal Holdings Inc (NASDAQ:PYPL) in light of a spiral of mixed investor concern fearing the margin impact from the Visa partnership, worries which the analyst believes are “warranted.” However, Sebastian understands the strategic mindset behind the deal fraught with shaken investor confidence, and deems it “underappreciated” by the public.

Consequently, Sebastian maintains an Outperform rating with a $48 price target, while raising 2017E revenues, but lowering EPS estimates in reflection of margin headwinds PayPal faces in this transition year.

From the analyst’s evaluation of the online payment giant, “Our proprietary survey of PayPal users suggests there may be a material shift to credit card funding; however, PayPal stands to benefit from incremental volume and user growth, as well as a stronger competitive positive vs. Apple/Android Pay.”

Sebastian believes enhancing relationships with card network/issuers is the key to unlocking steady, rising growth, concluding, “Despite shares remaining in the ‘penalty box’ until management provides further clarity on margins, we would be buyers on further pullbacks as we expect little change in cash flow $/intrinsic value.”

According to TipRanks, top five-star analyst Colin Sebastian has earned a high ranking of #6 out of 4,120 analysts. Sebastian upholds a stellar 80% success rate and realizes 19.2% in his annual returns. When recommending PYPL, Sebastian earns 1.9% in average profits on the stock.

TipRanks analytics exhibit PYPL as a Buy. Based on 26 analysts polled by TipRanks in the last 3 months, 16 rate PayPal a Buy, 9 maintain a Hold, and 1 issues a Sell. The average price target stands at $44.40, marking a 15% upside from where the shares last closed.

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