On Thursday, BofA Securities updated its outlook on PayPal (NASDAQ:PYPL), raising the stock price target from $68.00 to $74.00. The firm maintained a Neutral rating on the stock. The adjustment follows PayPal's first-quarter results and the company's decision to include stock-based compensation (SBC) in its adjusted earnings per share (EPS) guidance moving forward.
BofA Securities now anticipates PayPal's adjusted EPS for fiscal years 2024, 2025, and 2026 to be $4.17, $4.73, and $5.29, respectively. These projections have been revised to account for stock-based compensation, with previous estimates standing at $5.17, $5.56, and $6.08, which did not factor in SBC.
The new price objective of $74.00 is based on a 16 times multiple of the company's projected 2025 adjusted EPS, which has increased to $4.73 from $4.24 after including stock-based compensation. The valuation also incorporates a Discounted Cash Flow (DCF) analysis.
BofA Securities views the year 2024 as a transitional phase for PayPal, acknowledging that while the company is making adjustments, there remain medium to long-term concerns about competitive pressures in the industry. The firm's stance remains Neutral as it monitors PayPal's progress and the evolving payments landscape.
InvestingPro Insights
As PayPal (NASDAQ:PYPL) navigates a transitional phase, real-time data from InvestingPro provides a clearer picture of the company's financial health and market position. With a market capitalization of $69.64 billion and a P/E ratio that stands at a modest 17.05, PayPal is trading at a discount relative to its near-term earnings growth potential. This is further highlighted by the company's adjusted P/E ratio for the last twelve months as of Q1 2024, which is slightly lower at 16.78.
InvestingPro Tips indicate that PayPal's management has been actively repurchasing shares, signaling confidence in the company's future. Moreover, while 24 analysts have revised their earnings expectations downwards for the upcoming period, PayPal remains a prominent player in the Financial Services industry and is expected to remain profitable this year, having already been profitable over the last twelve months. It is noteworthy that the company does not pay a dividend, which may influence investors seeking income-generating investments.
For those considering an investment in PayPal, these insights could be crucial in making an informed decision. Interested readers can find additional InvestingPro Tips for PayPal, which may provide further depth to their research. To enhance your investment analysis, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. Note that there are 6 more InvestingPro Tips available, offering a comprehensive understanding of PayPal's financial standing and market prospects.
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