UBS raises PayPal stock price target, pointing to improving gross profit trends


On Wednesday, UBS updated its outlook PayPal Holdings Inc. (NASDAQ: ) stock, raised its target price on the company's stock to $71 from $63 previously. The company maintained a neutral rating on the stock. This adjustment follows PayPal's recent changes to its financial reporting methodology during its fourth-quarter 2023 earnings call.

The new price target is based on approximately 15.5 times projected 2025 non-GAAP earnings per share (EPS) of $4.55, an increase from the previous estimate of $4.41. UBS's revision reflects a change in valuation multiple from 14 times previously. This change is attributed to better gross margin trends across PayPal's core business operations.

UBS's revised price-to-earnings ratio suggests medium-term growth (MTG) of around 1.2 times, up from previous estimates of 1.0 times. This updated ratio is slightly higher than the median observed by PayPal's peers of approximately 0.9x.

The company's raised 2025 profit forecast was affected by PayPal's updated guidance, which now fully accounts for stock-based compensation (SBC) and related payroll taxes.

The financial services company detailed its rationale behind the updated data, showing improving gross profit trends were a significant factor in the higher expectations. PayPal's move to fully expense SBC and related payroll taxes brings a more conservative and transparent approach to its financial reporting, consistent with industry standards.

Investment Professional Insights

InvestingPro's live data provides more context for investors considering PayPal Holdings Inc (NASDAQ: PYPL ), following UBS Group AG's recent price target update. The company currently has a market capitalization of $71.5 billion and a price-to-earnings ratio of 17.69, adjusted to 18.31 based on the trailing twelve months ending in the fourth quarter of 2023. Earnings Growth P/E ratio, an InvestingPro tip, highlights its potential for value-seeking investors.

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PayPal's revenue grew 8.19% in the past 12 months as of the fourth quarter of 2023, which is further evidence of PayPal's financial health and reflects its solid performance in the financial services industry. Furthermore, the company has seen a significant price increase of 31.48% over the past six months, which is in line with another tip from InvestingPro Tip that highlights PayPal as a prominent player in the industry. These metrics suggest the company has a strong market position and positive stock performance prospects.

For investors looking for more in-depth analysis, coupon codes can be used to access other InvestingPro Tips PRONEWS24 Enjoy an additional 10% discount on yearly or annual Pro and Pro+ subscriptions. This allows investors to fully understand PayPal's prospects and make informed decisions based on extensive expert insights.

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