- BTIG’s Mark Palmer has upgraded PayPal from Neutral to Buy with a $300 price target.
- The analyst is positive on its long-term growth trajectory after the introduction of crypto service last year.
- Possible removal of card intermediaries could give another boost to PayPal’s growth.
Financial services firm BTIG analyst Mark Palmer has upgraded PayPal from Neutral to Buy, setting a $300 price target for its stock. The company’s shares were up 1.79% since yesterday reaching a value of $250 before the trading session on Friday.
In a note to investors earlier this week, Palmer asserts that PayPal’s strong traction on its cryptocurrency initiative could see the fintech company’s annual revenues grow by more than $1 billion by 2022.
Custody and trading services for PayPal are powered by Paxos Crypto Brokerage, the operator of itBit crypto exchange. The platform’s trading volume has spiked since the start of the year, with $242 million worth of crypto moved in a single day, January 11.
Palmer assumes that "the vast majority" of volume on the exchange reflects trades for PayPal customers, leading to his projection.
"Much more importantly, the traction seen in itBit’s rising crypto volumes bodes well for PYPL’s active account growth and engagement," wrote Palmer.
PayPal launched its crypto service in November 2020, allowing all account holders in the US to buy and sell Bitcoin, Ethereum, Bitcoin Cash and Litecoin within their digital wallets. The payments giant plans to roll out the service to "select international markets" and 26 million merchants worldwide, as well as to its social payments service Venmo in 2021.
Palmer believes that this bodes extremely well for PayPal's active account growth and user engagement.
"While PYPL CEO Dan Schulman recently stated that the company has a goal of 1 billion active users on its platform, the company could sustain and accelerate its growth through increased engagement alone, in our view," the analyst said.
Another thing that could have a positive impact on PayPal’s growth is possible removal of card intermediaries such as Mastercard and Visa from merchant cryptocurrency transactions. According to BTIG, Bitcoin and other supported cryptocurrencies will significantly lower the cost of such transactions boosting company’s take rate and margins.
Currently, PayPal charges merchants a 2.9% fee on a standard fiat currency transaction, with most of that fee going to the card networks.