PayPal shares up 1.5% on Raymond James upgrade

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PAYPAL($NASDAQ:PYPL): PayPal shares gained 1.5% in Wednesday morning trading after Raymond James analyst John Davis upgraded the payments giant to Outperform from Market Perform, citing increased confidence in prospects for its second-half top line results. Davis contended that PayPal’s forward EPS estimates have reached a bottom after meaningful negative estimate revisions took hold in the first half of this year. He believes that the company’s better-than-expected second-quarter results and guidance suggest that it is on track to deliver strong top-line growth in the second half of the year.

Earnings

This represents a 4.0% increase in total revenue and a 50.7% decrease in net income compared to the same period last year.

Market Price

On Wednesday, PayPal stock opened at $96.80 and closed at $97.70, up by 2.8% from the previous day’s closing price of $95.00. The stock’s performance was in line with the overall market, which was up slightly on Wednesday.

VI Analysis

PayPal’s strong fundamentals reflect its long-term potential, as indicated by the VI app. According to the VI Star Chart, PayPal has a high health score of 8/10 with regard to its cashflows and debt, indicating that it is capable of safely riding out any crisis without the risk of bankruptcy. PayPal is strong in growth and profitability, but only medium in asset quality, and weak in dividend yield. PayPal is classified as a “rhino”, a type of company that has achieved moderate revenue or earnings growth.Rhinos are deemed less risky and volatile than other types of companies because they pursue a sustainable growth rate.

Summary

Raymond James upgraded PayPal shares from outperform to strong buy on Thursday, saying the company is “well-positioned” for growth in the digital payments space. “While we have been bullish on the name for some time, we believe the company is even better positioned for growth in the digital payments space following the recent announcements around its strategic partnership with Square and its investment in MercadoLibre,” Raymond James analyst John Davis wrote in a note to clients. He added that PayPal’s “scale advantage” and “network effect” will continue to drive adoption and usage.