While PayPal (PYPL) has gained 55% this year, BTIG LLC analyst Mark Palmer says in a Wednesday report that the stock still has upside. Growth potential at PayPal's millennial-friendly Venmo payments app and changes the company is considering at its credit business prompted the analyst to raise his price target from $63 to $70 per share.

Shares of PayPal Holdings Inc., which is based in San Jose, Calif., were roughly flat Wednesday at $61.30.

PayPal's Venmo social payments system, which lets users send money between themselves and increasingly pay merchants, is popular. The services 210 million active users sent and received $8 billion in cash over the service in the second quarter. The business does not contribute much to PayPal's top line, however.

The nascent "Pay with Venmo" service, which charges merchants a fee for processing payments, has growth prospects, Palmer suggested. Chains such as Lululemon Athletica Inc.  (LULU) and Forever 21 Inc. accept the service, and PayPal says it hopes to sign up millions of its merchants by the end of the year.

"As 'Pay with Venmo' gains traction, we believe it will help (PayPal) to address one of the concerns about its model, other than competition and credit risk, that has lingered: declining transaction take rates," Palmer suggested.

Meanwhile, PayPal has been exploring changes to its credit business that BTIG argues could improve its stock price.

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The company had $6.1 billion in gross receivables from its consumer and merchant loan businesses at the end of the second quarter. Palmer suggested that the "presence of consumer loans on its balance sheet and the potential for credit-related earnings volatility" has lowered PayPal's valuation. Selling receivables or allowing a third party to fund the loans from the start could free up $5 billion in capital, he added. While the move could dilute earnings, Palmer suggested that removing credit risk would improve PayPal's valuation.

Separately, Jefferies analyst Ramsey El-Assal noted in a Wednesday report that some PayPal bears are looking ahead to the expiration of a contract with former parent eBay Inc. (EBAY)  in 2020 with trepidation. Ebay accounts for 14% of PayPal's total payment volume, he noted, while PayPal processes 73% of eBay transactions.

"We don't see eBay walking away from (PayPal)," El-Assal wrote, suggesting that the companies "rely much too much on each other" to end their relationship.

Ebay could improve its economics by taking on more of the roles that PayPal current provides, such as fraud protection, billing and customer service. PayPal could withstand changes to the relationship, however.  "The punchline of our proprietary analysis is that the EPS impact of a EBAY contract renegotiation should prove manageable because EBAY will have declined to a much lower revenue and earnings contribution for (PayPal) by 2020 when the contract expires," he wrote.

Even if PayPal's payments to Ebay increased by 50%, El-Assal calculates, it would only reduce earnings per share by 8%.

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