Credit Suisse analyst Timothy Chiodo reiterated PayPal Holdings Inc
The analyst made minor model updates ahead of Q2 2023 earnings, providing further context on lapping effects in the second half of 2023.
Chiodo updated his Branded Checkout share analysis (U.S. and Global Branded Checkout growth) and illustrative transaction expense analysis. He noted that U.S. Seasonally Adjusted (SA) Non-Store Retail Sales (U.S. Census Bureau) grew +8.0% YoY in Q2 2023 (+21.2% 2-year), which represented an ~100bps acceleration vs. +7.0% in Q1 (+21.8% 2-year; he noted that Q2 was the first quarter of 1-year acceleration in recent quarters with +10.5% YoY in Q4 2022 and +16.1% in Q3 2022).
Chiodo noted that SA Non-Store Retail Sales YoY growth accelerated in June to +9.4% (vs. +7.2% in May and +7.4% in April - partially owing to easier June 2022 comps relative to May and April).
SA Non-Store Retail Sales exhibited a 2019-base CAGR of +16.5% in Q2 2023, down ~40bps from +16.9% in Q1 2023 and exited Q2 at +16.2% in June 2023 (vs. +16.4% in May, +17.0% in April, and +16.9% to +17.0% in January-March).
SA Non-Store Retail Sales grew +2.6% QoQ in Q2, which compared to a 2013-2019 average of +2.2% QoQ in Q2 - he noted that QoQ growth in Q1 2023 was slightly weaker than typical seasonal in recent years at +1.4% QoQ (vs. 2013-2019 average Q1 QoQ growth of +2.5%).
The analyst viewed the trends as supportive of PayPal's U.S. Branded Checkout YoY growth (which has narrowed its gap below SA Non-Store Retail Sales YoY growth in recent quarters).
He noted Mastercard disclosed U.S. eCommerce SpendingPulse data for April and May in a recent media appearance, with April spending up 9.5% YoY (~350bps deceleration vs. March) and May up 13% YoY.
The price target remained unchanged at $80 on ~14x non-GAAP 2024E EPS, implying ~18x 2024E non-GAAP less tax-affected SBC EPS. 2023E and 2024E Non-GAAP EPS to $4.98 and $5.66 (vs. prior $4.96 and $5.63) owing to minor additions to our transaction expense forecast.
Price Action: PYPL shares traded higher by 0.50% at $73.76 on the last check Monday.
