An earnings beat for this stock wasn’t enough for the market, but a few analysts say now’s the time to buy the dip. Here’s why.
PayPal (NASDAQ: PYPL) delivered an earnings beat after the bell on Monday, reporting earnings per share of $1.07 on revenue of $5.46 billion, compared to analysts’ estimates for earning of $0.94 per share on revenue of $5.43 billion.
But shares fell nearly -7% Tuesday after the company lowered its full-year revenue forecast and said growth in new accounts slowed in its fiscal third quarter.
While PayPal continues to add customers amid the ongoing boom in online shopping, it said it added 15.2 million net new active accounts last quarter, down sharply from the 21.3 million reported for the second quarter.
As for full year revenue, the company said it now sees it climbing by 21% to 22% excluding the impact of currency swings. The guidance is down slightly from the 22% PayPal expected three months ago in revenue growth for the year.
Still, PayPal has been a big winner this year as the coronavirus triggered a massive jump in e-commerce growth with the stock up 89% year-to-date. Since the March bottom, PayPal shares are up a whopping 149%.
But while the stock slipped lower after earnings, MoffettNathanson analyst Lisa Ellis says the dip looks like a buying opportunity.
Ellis argued in a note this week that the online shopping surge should persist, consumers will keep signing up for digital payment options, and businesses will continue to migrate to digital payments, which is all good news for PayPal.
The analyst also says she’s staying bullish on the stock given that it has the highest chance of positive earnings revisions of any of the payments companies, Ellis said in the note.
Ellis believes PayPal should continue to post healthy revenue growth of 18% to 21% in 2021, fueling 21% growth in earnings per share. What’s also fueling growth is the fact that the company is gaining ground in key areas like e-commerce “checkout” buttons, peer-to-peer payment with Venmo, and other new revenue streams from its recent acquisitions of Braintree and Honey.
Dan Dolev, an analyst at Mizuho Securities, agrees that PayPal should retain key advantages and continue to gain market share in “checkout” buttons, as well as new revenue streams from QR code checkouts at bricks-and-mortar stores. Dolev remained bullish after earnings, and has a $290 price target on the stock, indicating nearly 42% upside for PayPal shares.
JMP Securities analyst David Scharf is also bullish on PayPal, rating the stock an Outperform with a $215 price target.
Scharf said he remains attracted to the company’s expanding payments platform, including the new Venmo credit card, Buy Now/Pay Later product, and its new cryptocurrency offering.
And Wolfe Research’s Darin Peller said he remains bullish on PayPal, writing that “we would view potential share weakness as an attractive entry for long-term fundamental investors.”
Peller raised his 2022 revenue estimates, noting that PayPal could earn more than $6 per share that year compared to estimates for $4.54 per share in 2021.