PayPal (NASDAQ:PYPL) Inc has retained a ‘Buy’ rating from Canaccord Genuity (TSX:CF, LSE:CF) following a mixed quarterly earnings report that led the company's shares down more than 25%. But the broker did cut its price target on the stock to US$215 from US$315 previously.
“One can choose to look at PayPal (NASDAQ:PYPL) through one of two lenses: some short-term profit and loss headwinds versus a company still positioned perhaps better than any other consumer FinTech to exploit a rapidly changing/growing market from here,” Canaccord analysts said.
The analysts noted that while the pace of growth in net new accounts is expected to moderate in 2022, “we are seeing a steady increase in user engagement metrics and expect to see more marketing behind driving engagement in 2022".
READ: PayPal plummets as results fall short of expectations and outlook seems dull
PayPal (NASDAQ:PYPL) has shown that it remains nimble despite its size in exploiting rapidly emerging opportunities: scaling an impressive Buy Now Pay Later (BNPL) offering and launch of equity trading, the analysts said.
“While Venmo has been slow to monetize over the last couple of years, we are encouraged that the deal with Amazon remains on track to launch this year,”analysts said.
“Being about half of all ecommerce volume, acceptance of Venmo on the Amazon platform will be a big driver of headwind to tailwind reversal in-take rates and emergence of a very high-growth revenue stream.”
They further added that this could be the largest single catalyst for PayPal (NASDAQ:PYPL) in 2022.
“While Q4 results were relatively in-line, softer ecommerce spending, higher inflation, supply chain disruptions, removal of stimulus, eBay and tougher comps are weighing on the business in Q1,” Canaccord analysts said. “But none of these factors have anything to do with core fundamentals or prospects around business model expansion from here.”
Analysts said that PayPal has done a “great job in consumer ecommerce over the past few years” while other FinTechs have perhaps plowed forward faster in other areas such as consumer finance.
With a new, holistic mobile app, launch of equity trading this year, plus other moves into consumer finance, the might of the PayPal brand could look quite different in a few years despite its ubiquity today as a method of buying goods online, analysts reiterated.
“Still, we expect that shares could mark some time, especially since growth is heavily weighted towards H2. But given the confluence of company-specific events here combined with the market sell off, this could end up being one of the better times to accumulate PayPal shares, at least in the last few years,” they concluded.
Contact Ritika at ritika@proactiveinvestors.com