KBW Talks Mobile Payments Leader PayPal’s Earnings, Notes Modeling Difficulty Ahead

July 29, 2019         By: Steven Anderson

PayPal, by some figures, has proven to be one of the great mobile payments front. It’s become pretty much the de facto way to pay on eBay, though there were some signs that might change in the not-too-distant future. Yet with a series of deals on hand, PayPal looked like it would not only beat the losses that might have been represented by a loss of eBay business but come out better in the process. A new report sent our way from KBW says that that’s the case this year, but maybe not in the future.

The second quarter 2019 results from PayPal, KBW noted, were sufficient to raise earnings per share (EPS) estimates to $3.15, up fairly substantially from the original projection of $2.98. This move “incorporate(s) the investment gain-related beat, offset by integration and pricing delays in the second half of 2019 (2H2019).”

However, despite the bump in this year’s projections, KBW is leaving its 2020 projections as they currently lay. The 2020 EPS estimate is currently set at $3.45, and there it shall stay, at least for the time being. KBW notes that there’s a big potential lift in 2020 coming thanks to “partnership and pricing delays,” but notes that there could be “variability in eBay impacts and time to ramp new deals.” Such uncertainty throws a wrench in the modeling works, leaving KBW to hold onto its current price target of $136 and its rating of Outperform.

KBW also notes that, while PayPal is one of the “scale players” as well as a major incumbent firm in the mobile payments and e-payment market, it’s also facing a seriously competitive field. It even notes that PayPal may well find itself an acquisition target for a “larger player,” though it could likely stand up well on its own.

Basically, PayPal has come a long way from its days as eBay’s subsidiary, and it shows. It’s got real potential to be a serious player in the market, and on many fronts, it already is. Of course, it’s got a lot of competition to face, and while 2020’s successes aren’t exactly assured, it’s built a very solid base from which to work going forward.

PayPal’s chances of success are looking bright, a point KBW seems well in agreement with.