Investing.com – PayPal is nursing heavy losses Thursday after it cut its revenue estimates for the year, but that has done little to damper the optimism from some on Wall Street who expect the payments company to embark on a money-making spree.
PayPal said it expected full-year revenue of between $17.6 billion and $17.8 billion, well below Wall Street’s estimates of $17.92 billion, sending PayPal (NASDAQ:PYPL) more than 4% lower. Despite the tumble, the shares are up 38% for the year.
The downbeat outlook arrived as the company reported mixed earnings, with beat on the bottom line but a miss on the top line.
PayPal reported earnings of 86 cents share, above estimates of 69 cents in its fiscal-third quarter, according to analysts polled by Investing.com. But revenue of $4.31 billion missed estimates of $4.33 billion.
The weaker guidance, however, appears to have done little damage to PayPal's growth narrative, with some on Wall Street convinced that it is too early to cash in on the stock.
Wedbush maintained its outperform rating on PayPal and a $140 price target on the stock blaming the revenue miss on delays in both revenue contributions from pending partnerships and in price increases. That compares with the consensus 12-month target of $120.24 of analysts tracked by Investing.com.
The brokerage also pointed to the payment company's strong fundamentals seen in the quarter, with total payment volume rising 24% to $172 billion. Active accounts and customer engagement also rose in the quarter.
"The bottom line, the combination of quarterly metrics strength (plus) the benefits of pending strategic partnerships continue to point to a powerful monetization phase at PayPal," Wedbush said.
Morgan Stanley (NYSE:MS), meanwhile, raised its price target on Paypal to $129 from $114, on expectations that offline could represent a valuable growth driver for the company.
"(O)ur new US Digital Wallet model and AlphaWise survey show consumers’ desire to make PayPal usage 'omni-channel,'" Morgan Stanley said in a note to clients.
The bank also downplayed the threat of competition PayPal faces.
"Offline could be an incremental driver, providing a higher rate of compounding earnings per share growth, while competition remains more imagined than real," it said.