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PayPal Holdings Inc. is on track to close the day with a market capitalization above $300 billion for the first time Thursday after the payments company beat earnings expectations for its latest quarter and gave an upbeat forecast for user growth.
The company is coming off what it called the strongest year in its history, as the pandemic drove more people to try out its digital payments offerings and increase their frequency of use. PayPal PYPL, +6.80% also rolled out a number of new products lately, including QR code acceptance and a way to buy cryptocurrencies through its platform, which the company said were off to fast starts.
PayPal shares were up 6% in Thursday trading following the company’s fourth-quarter report.
The company is now the 17th largest company in the S&P 500 index, according to Dow Jones Market Data. Its market value is larger than those of Goldman Sachs Group Inc. GS, +1.90% and Morgan Stanley MS, +2.05% combined, as well as Citigroup Inc. C, +1.60% and Wells Fargo & Co. WFC, +2.85% combined.
“Taking a step back, we believe the quarter provided the most compelling evidence yet of PayPal’s expansion and execution ‘beyond the button’ i.e. widening utility of the app,” wrote Bernstein analyst Harshita Rawat. She described the “Ant’tification” of the PayPal experience, a reference to Chinese payment giant Ant Group’s traction with varied forms of financial services.
Consumers have long been willing to increase their engagement with PayPal, Rawat argued, but the “bottleneck” was the number of products the company had available. With many new product introductions lately, she’s now “more constructive on monetization and less concerned on competition.” She rates the stock at outperform and boosted her price target to $315 from $297.
Rosenblatt Securities analyst Sean Horgan left PayPal’s Wednesday afternoon earnings call feeling more upbeat about the potential for PayPal’s Venmo service. He now believes the company will surpass its $900 million 2021 revenue target for Venmo, raising his own revenue estimate for the service to $1.1 billion from $830 million as the company plans for a broader rollout of its Venmo credit card, cryptocurrency trading on the Venmo platform, and integration with the Honey discount platform.
“This is all reflective of a proven strategy to monetize a digital wallet, as evidenced by the Cash App’s success,” he said, referring to Square Inc.’s SQ, +4.42% mobile wallet. “Cash App users who adopted 2+ products generated 3-4x more gross profits than P2P- only customers. We believe Venmo is on track to reach monetization similar to Cash App’s.” Horgan has a buy rating on PayPal’s stock and upped his price target to $320 from $310.
Guggenheim analyst Jeff Cantwell cheered the company’s “robust” guidance for 2021, including a forecast for high-20% growth in total payment volume and a prediction for 50 million net new accounts, both of which came in above his expectations.
“Looking at PYPL’s track record, we think the revenue guide likely left room for upside – particularly given the company’s launch of crypto,” he wrote, while maintaining a buy rating and raising his price target to $304 from $268.
PayPal is scheduled to host an investor day on Feb. 11, when it is expected to offer more details on its longer-term vision.
Shares of PayPal have risen 38% over the past three months as the S&P 500 SPX, +0.89% has gained 12%,
