Shares of financial technology pioneer PayPal Holdings (PYPL 0.15%) popped in early trading on Wednesday after scoring an upgrade from a prominent analyst. At 10:20 a.m. ET, PayPal stock was up 4%.
Bank of America analyst Jason Kupferberg likes the risk-reward profile of PayPal stock, according to The Fly. For this reason, he's upgrading the stock from neutral to buy. And Kupferberg's price target for PayPal stock was raised from $94 per share to $114 per share, suggesting approximately 20% upside from where it trades now.
Among potential catalysts for PayPal stock are operational efficiencies. But Kupferberg isn't just making an educated guess here. On the conference call to discuss financial results for the second quarter of 2022, PayPal CEO Dan Schulman said, "We are meaningfully reducing our cost structure."
By reducing its cost structure, PayPal hopes to take ongoing revenue growth and convert it into outsized profit growth, which would make the stock more attractive to investors for sure.
PayPal stock is down 69% from its high in 2021 and down roughly 50% year to date. While this isn't fun for shareholders, it could actually be a positive for patient long-term investors. Kupferberg also mentioned share buybacks as a potential catalyst for PayPal stock. And indeed, the company recently authorized a $15 billion repurchase program. The silver lining here is that the lower the stock is, the more shares management can repurchase, making that investment go further.
However, in the end, PayPal will need to keep finding ways to grow, bucking the recent slowdown in its growth rate. And it will need to make good on its promise of finding cost reductions without compromising on the quality of its products. Without these things, share repurchases likely won't be a sustainable long-term catalyst.