CLSA Initiates Underperform on Paypal Holdings Inc (PYPL); Sees Increasingly Competitive Landscape
In a research report issued today, CLSA analyst Tom McCrohan initiated coverage on shares of Paypal Holdings Inc (NASDAQ:PYPL) with a $36 price target, which represents a slight upside potential from current levels.
McCrohan wrote, “A near and present danger exists to PayPal’s model as new mobile and online alternatives are challenging the company’s value proposition to consumers and merchants. Achieving mid-20% Total Payment Volume (TPV) growth will require concessions, although it remains unclear if PayPal can offset any gross margin pressure with operating leverage. Our US$36 target assumes a forward multiple of 24x, in line with Visa and MasterCard. We do not view PayPal as worthy of a multiple materially greater than Visa and MasterCard, particularly given PayPal’s challenging competitive landscape.”
The analyst added, “Our checks indicate major retailers pay an average cost of 100bps (or lower) to accept plastic, which is too low for PayPal to realistically compete. Paying above this rate would imply a major retailer wants access to PayPal’s customer base, either because PayPal customers pay more on average or are incremental customers to the retailer, or both.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Tom McCrohan has a total average return of 9.6% and a 83.3% success rate. McCrohan is ranked #1645 out of 3748 analysts.
Out of the 25 analysts polled by TipRanks, 18 rate Paypal Holdings Inc stock a Buy, 4 rate the stock a Hold and 3 recommend Sell. With a return potential of 21.2%, the stock’s consensus target price stands at $42.56.