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PayPal Holdings Inc shares were advancing recently after a sell-side analyst took a bullish stance on the payments stock. Mark Palmer, the BTIG analyst, said that the rising shift toward digital payments due to the pandemic has possibly hastened PayPal’s long-term growth trajectory. In October, the company announced that its 333 million active users would buy, sell and hold Bitcoin and other cryptos with their digital wallets.
Palmer elevated PayPal from Neutral to Buy with a $300 price target calling PayPal a stealth cryptocurrency winner.
The recent spike in revenue by the itBit cryptocurrency exchange that powers PayPal’s crypto initiative suggests crypto could generate plenty of income.
PayPal’s Annual Revenues
Palmer estimates that crypto could add more than $1 billion to PayPal’s annual revenues by 2022. He notes that the giant platform uses itBit cryptocurrency exchange, where volume has been rising. The traction seen in itBit’s increasing crypto volumes bodes well for PYPL’s active account growth and engagement.
The analyst also foresees the company benefiting from removing card intermediaries from merchant transactions executed using Bitcoin and three other supported cryptocurrencies.
PayPal’s users can now trade cryptocurrencies through the PayPal app, including Bitcoin, ethereum, and Litecoin. Crypto is coming to PayPal’s Venmo app for peer-to-peer transactions later this year. The company says it plans to make crypto available as a funding source this year for purchases at its 28 million merchants worldwide.
PayPal CEO Dan Schulman recently stated that the company could sustain and accelerate its growth through increased engagement alone.
Schulman said the move to the crypto market is inevitable. It has brought significant advantages like financial inclusion and access, efficiency, the resilience of the payments system, and governments’ ability to disburse funds to citizens swiftly.
He added that the digital payments expertise, global reach, two-sided network, security, and compliance controls provide the opportunity, and the responsibility, to help facilitate the understanding, redemption, and interoperability of these new instruments of exchange.
The lower-cost funding linked with the use of crypto in funding merchant transactions could provide a boost to PayPal’s take rate and margins, according to BTIG.
Faith in Crypto
Bitcoin value spiked above $40,000 over the last year, reaching an all-time high, though it has since fallen back to about $32,000. Bitcoin’s success could fuel revenue growth above current estimates since PayPal gets a cut of cryptocurrency transactions made through its app.
Paypal’s stock has doubled over the past year on the accelerating digital payments adoption, so it isn’t far-fetched to think PayPal could gain another 23% in the coming year.