On Wednesday, analysts at Mizuho initiated coverage on several fintech names this week, including shares of PayPal with a Buy rating and $285 price target. As part of their bullish investment thesis, the analysts called out that, in search for a contactless form of payment, PayPal announced an agreement with CVS to implement QR code’s in over +8,000 of their retail stores.
According to a survey conducted by the analysts, 60% of respondents Venmo and PYPL said they were willing to adopt and use QR codes as a from of payment.
Their survey work also suggested that "the average respondent taps 3.7x per week with an average purchase value of $34. This amounts to an average checkout value per year of roughly $6,500."
PYPL also announced that it is currently working with more than 100 large enterprise merchants in U.S and Europe to meet customer satisfaction.
Due to the broad consumer rate, Mizuho predicts a $400-$500bn TAM opportunity for the company. the analysts also noted that "conservatively assuming PYPL realizes just ~20% of this opportunity over time, translates into ~$90bn or 10-15% potential long-term upside to TPV."
The analysts also initiated coverage on shares of Square Inc., commenting that the company has shown the ability to have outsized growth without the normal operations from small businesses created from COVID-19 which resulted in a Buy rating and $225 price target.
In addition, SQ seller GP is positioned to benefit and increase from the small- medium business dislocation by approximately 20-30% as study shows 4x upside to Cash App. Analysis done by the team at Mizuho shows Cash App users could potentially double by 2023 from 30mn users currently.
"Specifically, during the 2008 downturn, the US economy lost ~357,000 SMBs... and required ~6 years to return to prior levels. Conservatively assuming that the US loses half as many SMBs vs. the Great Recession and only 50% re-emerge (e.g. due to the massive disruption caused by shift to online, retail apocalypse etc.), this would still create a 20-30% incremental GP opportunity for SQ." according to the analysts.
Disclosure: At the time of publication, I have no positions in any of the securities mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article.