It’s been a strong year for PayPal, which has seen its shares up 75 percent since the beginning of the year.
And, as of last week, PayPal had carved itself out a new distinction — a market cap that has bounced over American Express.
PayPal’s market capitalization hit at about $83 billion, nearly double the $47 billion value it had when it spun off from eBay Inc. a little over two years ago. And as Amex is in the rear window, some other big name Wall Street firms are at risk of being demoted — at $83 billion, PayPal is $6 billion away from passing Morgan Stanley and within $10 billion of Goldman Sachs’ valuation.
On Wednesday, analysts at Morgan Stanley upgraded PayPal’s stock, noting that PayPal “is among the few large companies that can deliver high-teens revenue [growth] … with significant upside opportunities.”
But Craig Maurer, an analyst at Autonomous Research, warned that PayPal’s shareholders aren’t pricing in much room for error if the company doesn’t deliver on its projections.
“When I talk to bulls, they’re in the nothing-can-go-wrong camp because it’s the only way to justify the valuation,” Mr. Maurer said.
PayPal’s earnings will be out for all to see on Thursday — as of now, it trades at a multiple of around 32 times forward earnings. By comparison, Visa trades at around 27 times forward earnings and Mastercard is around 29 times. AmEx, meanwhile, trades just shy of 15 times.
But PayPal has also expanded its purview during the Schulman era, transitioning from being a simple payments company into attempting to build the operating system for global digital commerce.
“It’s grown into much more of a technology platform play,” said Lori Keith, a portfolio manager and research analyst at Parnassus Investments, which owns PayPal shares. “They were trying to be the disrupter in the space, but now they are very much focused on partnering.”