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PayPal (NASDAQ:PYPL) is up nearly 2% in premarket Wednesday after a Raymond James analyst upgraded shares to Outperform from Market Perform with a $123 per share price target.
For the analyst, PayPal stock offers “everything you want to own in this tape.” This is because PayPal shares offer defensive growth driven by secular tailwinds, significant FCF generation, clean balance sheet, and FY23 estimates that will likely head higher, not lower.
The analyst has “increased confidence” that the expectations reset is now completed, with multiple expected to “grind higher as estimates rise.”
“The combination of high margin incremental OVAS revenue from higher rates (up to +300 bp rev growth tailwind in FY23), the recently announced $15B buyback authorization ($18B total or 16% of the mkt cap), as well as the potential to cut opex further if needed (up to an additional ~$700M), we have a high degree of confidence the Street’s $4.78 is not only safe, but biased higher despite macro uncertainty,” he further explained in a client note.
Finally, the analyst also sees “reasonable valuation,” which should offer an attractive opportunity for investors to “add to positions at current levels.”
