After Paypal Holdings Inc (NASDAQ:PYPL) announced a partnership agreement with Visa that resolved a longstanding feud over fees paid to the credit card issuer, fast forward seven weeks later, where the online payment giant declared another truce under its belt, smoothing over similar issues with major credit card issuer MasterCard.
In reaction, BTIG analyst Mark Palmer anticipates “continued rapid growth” for PYPL and reiterates a Buy rating with a price target of $48, which represents a nearly 29% increase from where the shares last closed.
This deal means MasterCard will not charge PYPL with a digital wallet operator fee any more. In return, PYPL has offered a new halt to ACH steering, where customers were once encouraged to directly link PYPL accounts to their banks with the advantage of lower transaction fee charges. Palmer expects the truce “should help should help MasterCard to refine its rewards programs while bolstering its fraud prevention efforts.”
Palmer praises the agreement as one of a steam roll of efforts PYPL has maneuvered recently to improve its in-store presence in the midst of tackling rivalry from rising competitors Apple Pay and Android Pay, to name a couple. Palmer commends these efforts for successfully generating “rapid growth” for the company, but notes a weakness in enhancing traction in stores.
“While PYPL CEO Dan Schulman in a statement announcing the MasterCard agreement said that with each partnership deal it signs, it improves ‘our own economics,’ it is not clear what the impact of the Visa and MasterCard deals will be on the company’s near-term profitability. With that said, we view both deals as important to PYPL’s efforts to counter competitive threats,” he concludes.
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, analyst Mark Palmer is ranked #3,856 out of 4,147 analysts. Palmer has a 47% success rate and faces a loss of 3.6% in his yearly returns. However, when recommending PYPL, Palmer gains 3.1% in average profits on the stock.
TipRanks analytics exhibit PYPL as a Buy. Based on 23 analysts polled in the last 3 months, 15 rate a Buy on PYPL, 7 maintain a Hold, while 1 issues a Sell. The 12-month average price target stands at $44.82, marking a 20% upside from where the stock is currently trading.