Solid Momentum In Digital Commerce Bodes Well For PayPal Ahead Of Q4 Results

• Deutsche Bank analysts Bryan Keane, Ashish Sabadra and Korey Marcello reiterated a Buy rating and $44 price target on shares of Paypal Holdings Inc (NASDAQ: PYPL) on Tuesday.
• The firm anticipates share gains will offset weaker sales.

PayPal is scheduled to announce its fourth quarter fiscal 2015 financial results after the market closes next Wednesday. Analysts at Deutsche Bank are modeling earnings of $0.35 per share on revenue of $2.455 billion, up 12 percent year-over-year.

The National Retail Federation said Holiday sales were weaker than expected. However, Deutsche Bank believes digital commerce sales remain strong. According to MA Spending Pulse, online sales rose 20 percent this Holiday season. For its part, ComScore assured mobile commerce accelerated to 59 percent year-over-year. Both these trends bode well for PayPal.

Related Link: Jefferies Positive On PayPal Shares Heading Into Q4 Results

Deutsche Bank’s channel checks suggest further share gains for PayPal in mobile, where growth is speeding up and the company is enlarging its share faster than in desktop.

PayPal is “well positioned to be one of the key winners in digital commerce.” For fiscal 2016’s outlook, the analysts see no change in the company’s medium term guidance of mid-20 percent TPV growth, +15 percent cc revenue growth and flat or expanding operating margins.

The firm updated its fiscal 2016 model “to include Xoom fully offset by 2pts of FX headwinds.” Moreover, they noted, PayPal “trades at 10x EV/EBITDA, at a discount to acquirers trading at 12x, despite faster top and bottom-line growth.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.