Crypto could take another step towards mainstream adoption if new reports from CoinDesk turn out to be true.
On June 22, unconfirmed reports began making the rounds indicating PayPal (PYPL) will facilitate the buying and selling of cryptocurrency on its Venmo and PayPal platforms. With 325 million active accounts, the move – which could take place over the next three months – will position the company as a direct competitor of Square’s Cash App. Since launching Bitcoin trading in 2018, the Cash App has been a storming success.
The move is not an unexpected one, claims Rosenblatt Securities analyst Kenneth Hill.
“We are not surprised by the potential addition, and we believe a crypto offering will fit well with PYPL’s user base (particularly Venmo users). SQ’s Cash App monetization efforts serve as an effective blueprint of how to better monetize what had been a historically P2P user base. As the product evolves, we expect to see more substantial efforts made to extend product functionality to further engage and attract clients, in addition to adding services geared at monetizing those on the platform,” said the 5-star analyst.
Although PayPal subsidiary Venmo boasts more users than its P2P competitor, with it estimated to have 50 million MAUs (monthly active users) vs. the Cash App’s roughly 30 million, Square has been able to better monetize its platform. Hill reckons Cash App’s average revenue per user (ARPU) is more than 3x that of Venmo’s, illustrating the potential of the new initiative.
The addition of Bitcoin to the Cash App has resulted in increased engagement levels, and brought in more customers, a fact that is not lost on Hill.
“We believe a crypto trading offering will drive higher levels of engagement among Venmo’s young user base and potentially lead to improved monetization over time,” the analyst concluded.
Accordingly, Hill reiterated a Buy rating on PayPal, accompanied by a $163 price target. The figure, though, implies downside potential of 6% from current levels. (To watch Hill’s track record, click here)
Based on 23 Buys and 7 Holds, PayPal has a Strong Buy consensus rating. However, as is increasingly common in the current bubbly market, PayPal has just notched an all-time high (while also up by 60% year-to-date), so targets have been left eating dust. Therefore, the average price target of $160.85 indicates possible downside of 6%. (See PayPal stock analysis on TipRanks)