Half of PayPal analysts are back to bullish for the first time since January

By Emily Bary

PayPal's stock was rising Tuesday after an upgrade from Susquehanna

For the first time since the start of this year, half of analysts covering PayPal Holdings Inc. shares are in the bull camp.

That's after Susquehanna Financial Group analyst James Friedman upgraded the digital-payments-company's stock to positive from neutral on Tuesday. With his fresh bullish rating, 23 analysts tracked by FactSet have buy-equivalent ratings on PayPal shares (PYPL), while 22 have hold-equivalent ratings and one rates the stock a sell.

The PayPal bull camp used to be a lot bigger, but Wall Street has become worried recently about the company's competitive positioning, something that caused bulls to stop making up the largest portion of PayPal analysts back in January.

Friedman, though, feels upbeat about the company's prospects, thanks to the direction of a new leadership team that's been rolling out new product offerings and adjusting the operational vision.

See also: Why PayPal is making a bet on advertising as it looks to reignite its business

"Profitable growth is now a top priority for PayPal," Friedman wrote, and management's financial incentives are aligned accordingly. He said the company will be able to beat the consensus view in the coming years on growth in both transaction-margin dollars and adjusted earnings before interest and taxes.

The path for PayPal includes better pricing discipline in the company's Braintree unbranded checkout business, according to Friedman. PayPal can also leverage other value-added services, known as OVAS in the industry, to augment Braintree's financials.

He's also optimistic about some of PayPal's new product offerings and their ability to impact results. For instance, smarter receipts and a fresh approach to rewards could increase the company's consumer value proposition, he said, and a new Fastlane guest-checkout offering "could help gain share at Christmas."

Fastlane is meant to help speed up the process of guest checkout. "Note that with Fastlane the consumer does not need a PayPal account, opening a large vault of unbranded consumer economics," Friedman wrote.

PayPal shares were up nearly 2% in morning trading Tuesday. The stock had fallen 14% from June 7 to Monday's close, having come under pressure in part after Wall Street thought Apple Inc.'s (AAPL) announcements from WWDC posed some competitive risk.

Read: Affirm's stock charges up after Apple announces payments partnership

Friedman reiterated his $71 target price on PayPal shares. That implies 23% upside potential from Monday's close.

-Emily Bary

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07-02-24 0943ET

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