PayPal's stock packs nearly 50% upside, a renewed bull says. Here's why.

By Emily Bary

Mizuho cheers opportunity presented by new Fastlane checkout product

Mizuho analyst Dan Dolev moved to the sidelines on PayPal shares earlier this year, but now he's back in the bull camp.

The reason? Dolev is newly upbeat about PayPal's (PYPL) Fastlane offering, which aims to speed up the process of guest checkout.

The offering could drive a $1 billion to $1.5 billion boost to PayPal's transaction margin dollars over a medium-term horizon, he wrote in a Thursday report. That would translate to upside in the range of 5% to 10%.

Dolev lifted his price target on PayPal shares to $90 from $68 in his latest note, with the new target representing 47% upside from current levels. It's based on a higher target multiple - now 19 times estimated 2025 earnings per share, versus 15 times previously - and more optimistic earnings estimates.

"We believe the higher multiple is deserved amid new data showing less pressure on Branded business as well as strong early trends in the Fastlane opportunity," Dolev wrote. Branded refers to PayPal's core checkout button.

See more: PayPal CEO sees 'huge monetization opportunity' after revamp

Investors had been worried about the branded checkout business in light of heightened competition from Apple Inc.'s Apple Pay and other sources. But Dolev sees trends stabilizing there, based on his recent analysis of large e-commerce merchants that partner with PayPal.

Plus, in general, mobile checkout trends have improved. That's notable as mobile is "where the secular pressure has been more accentuated," Dolev said.

Dolev has a buy rating on PayPal shares, up from his prior stance of neutral. With the upgrade, 22 of the 45 analysts tracked by FactSet rate PayPal shares the equivalent of a buy, with 22 holding neutral stances and one giving the stock a sell rating.

The stock is up more than 2% in Thursday's premarket action, though it's slightly negative on a year-to-date basis and over a 12-month span.

More from MarketWatch: Why PayPal is making a bet on advertising as it looks to reignite its business

-Emily Bary

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05-30-24 0856ET

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