The investment case for the e-commerce payment giant PayPal Holdings Inc (NASDAQ:PYPL) looks robust thanks to its recent US$400mln acquisition of Hyperwallet Systems, according to Moshe Katri, a widely followed analyst with Wedbush.
The takeover of Hyperwallet, which assists smaller companies in getting paid for goods sold online, strengthens PayPal’s “merchant-facing” platform, writes Katri in a note to investors.
The acquisition is also important as it follows closely behind PayPal’s takeover of the Stockholm-based point of sale payments provider iZettle for US$2.2bn in May. The two deals will lift PayPal’s game in the competitive arena of online payments and allow it to compete against companies such as Square Inc (NYSE:SQ) and Adyen.
“We recently placed PayPal on Wedbush’s Best Idea’s List as we expect ongoing monetization efforts on both consumer facing (Payment to Payment, Money Transfer, advisory) and merchant-facing (integrated payments, software solutions, credit) platforms, combined with non-EBay, market-place opportunities to result in accelerating revenue growth with margin expansion potential,” says Katri.
The Hyperwallet acquisition, which is expected to close in the fourth quarter, provides PayPal’s 19 million merchants with multi-currency payment offerings in more than 200 markets; payments can be made with pre-paid cards, bank accounts, debit cards, cash pickup, checks and PayPal.
Katri is maintaining an Outperform rating and a US$100 price target on PayPal's stock partly on the view that transaction growth in the mobile payments space will be "explosive" going forward.
"We believe PayPal is well-positioned to post 15-20% and 10-15% in revenue and adjusted earnings per share growth, respectively, over the next few years," he concludes.
PayPal shares were flat at US$84.75 in pre-market trade.