There's no denying that it's been a tough few years for PayPal Holdings (PYPL -0.03%). The company pioneered fintech before it was fashionable, but a downturn in the economy and rising competition crushed the stock. Since its peak in mid-2021, the stock has fallen more than 80%. However, the company's recent results suggest its recovery is gaining steam.
One Wall Street analyst thinks there are good times ahead.
A rebound years in the making
Monness Crespi analyst Gus Gala boosted his price target to $95 on PayPal stock while maintaining a buy rating on the shares. For those keeping score at home, that represents potential upside for investors of 61% compared to Monday's closing price. The analyst cited PayPal's strong "beat and raise" quarter and improving engagement as providing increased confidence in the company's future outlook.
The analyst has clearly done his homework. In the second quarter, PayPal's revenue of $7.9 billion grew 9% year over year, delivering adjusted earnings per share (EPS) of $1.19, up 36%. For context, analysts' consensus estimates were calling for revenue of $7.8 billion and EPS of $0.99, so PayPal cleared both hurdles with ease.
Perhaps the biggest revelation was that PayPal's peer-to-peer (P2P) payments grew for the first time in three years, up 4% excluding Venmo, while Venmo grew 8%. That, combined with similar results from its unbranded card processing and other merchant services, formed the basis for the company's solid growth.
Management also boosted PayPal's guidance for the year, giving investors more reason to celebrate. The company is now expecting EPS growth in the low to mid-teens, up from mid- to high single digits.
As a result of its robust growth, PayPal also plans to accelerate its share repurchases.It's planning at least $6 billion in buybacks in 2024, up from its previous goal of $5 billion. The company has reduced its share count by nearly 10% in recent years, with additional buybacks on tap.
With its recovery firmly underway, PayPal stock is a buy.
