How much could Bitcoin be worth doing
? Much more than what is now priced into the stock.
BTIG’s Mark Palmer upgraded shares of PayPal (ticker: PYPL) to Buy on Wednesday with a $ 300 target. His reasoning: PayPal could be a stealth cryptocurrency winner.
361 million PayPal users can now buy, sell and hold cryptocurrencies through the PayPal app, including Bitcoin, ethereum, and Litecoin. Crypto is coming to PayPal’s VenP app for peer-to-peer transactions later this year, and PayPal says it plans to make crypto available as a financing source this year for purchases in its 28 million traders worldwide.
Bitcoin prices soared above $ 40,000 over the past year, always peaking, although it has since fallen back to about $ 32,000. Since PayPal is getting a cut of cryptocurrency transactions made through its app, it could boost revenue growth above current estimates.
Palmer estimates that crypto could add more than $ 1 billion to PayPal’s annual revenue by 2022. He notes that PayPal is using the itBit cryptocurrency exchange, where volume has been rising. “The traction seen in itBit’s growing crypto volumes bodes well for the growth and engagement of PYPL’s active account,” he writes.
PayPal could, in effect, take the crypto mainstream by acting as an intermediary between consumers and merchants. A user could buy and store Bitcoin on the PayPal app and use it to buy in an online store or retailer. The trader would be paid in dollars or other fiat currency with PayPal conducting the conversion and taking the exchange rate risk behind the scenes.
“We see this as important to the entire crypto ecosystem,” Palmer said in an interview. “If PayPal can lead the way in promoting the adoption of a crypto trader, it would be a huge driver for the space.”
One big question is what PayPal would charge traders for crypto transactions.
PayPal now charges merchants a 2.9% fee on a standard fiat currency transaction, most of which is transferred to card networks, such as
(MA). But PayPal would probably charge merchants a lot less for crypto. Rival BitPay charges merchants a 1% processing fee, for example, and keeps the revenue itself, cutting out the card networks (because blockchain technology facilitates crypto).
PayPal is not the only digital wallet that aims to take the crypto mainstream.
(SQ) and its Cash App may fall behind.
“We wouldn’t be surprised if Square did something similar,” said Palmer.
But PayPal may have a bigger impact as it is more widely accepted worldwide and has a larger merchant base.
None of this is positive for the card networks, and could be a pressing factor on their stocks. Indeed, Visa and Mastercard shares have dropped about 5% to 6% this year. Square is ahead 1%, and haas PayPal has risen 6% to recent prices around $ 248.
Palmer sees PayPal stock reach $ 300 a share on a multiple of enterprise value 9 times revenue, based on 2023 sales estimates of $ 39 billion. That would be a huge jump from the $ 25.5 billion in revenue the company is expected to take in this year. Adding an additional $ 1 billion a year from crypto may help it reach that target.
Write to Daren Fonda at [email protected]