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Shares of PayPal (NASDAQ:PYPL) are up over 4% after a Bank of America analyst upgraded to Buy from Neutral and hiked the price target to $114 from $94.
The analyst highlights that he sees upside potential to out-year consensus EPS estimates “for the first time in about a year.” The upside “will be driven primarily by additional cost efficiencies, and to some degree by share buybacks.”
The positive updates are a result of activities initiated by activist investor Elliott Management, who has a 2% stake in the fintech company.
“Based on potential $5+ of EPS power next year, PYPL trades at 18.4x P/E, which in our view represents attractive risk/reward, as Elliott’s involvement likely provides support to the stock,” the analyst told clients in a note.
The analyst is also positive about PYPL’s new CFO, Blake Jorgensen, who “has a track record of executing well on cost/margin initiatives.”
As far as catalysts are concerned, shares could re-rate higher on 2H top-line re-acceleration and the Analyst Day, which is due in the first quarter of next year.
