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Wall Street says PayPal will keep surging due to online payments dominance

Key Points
  • Robert W. Baird reiterates its outperform rating, predicting PayPal's earnings will top expectations next year.
  • Baird raises its price target to $59 from $54, representing 11 percent upside from Thursday's close.
Dan Schulman, president and chief executive officer of PayPal
Pau Barrena | Bloomberg | Getty Images

Robert W. Baird reiterated its outperform rating on PayPal shares, one of the market's best-performing stocks, predicting the online payments company's earnings will top expectations next year.

"We believe that the split from eBay represents a rebirth of a platform that already has the benefit of global scale, a trusted brand, and mobile orientation, " analyst Colin Sebastian wrote in a note to clients Friday. "PayPal's significant growth opportunities stem from the disruption in financial services caused by the digitization of money and broader shift to the mobile web."

PayPal shares rallied 35 percent this year through Thursday, compared with the market's 9 percent return in that period.

Sebastian raised his price target for PayPal to $59 from $54, representing 11 percent upside from Thursday's close.

He cited how PayPal continues to take online payments market share with its transaction volume rising 25 percent per year compared with the e-commerce industry's "mid-teens growth." He also noted that PayPal users spend twice as much online as non-PayPal customers, which is attractive to merchants.

Sebastian increased his 2018 earnings-per-share estimate for PayPal to $2.18 from $2.08 versus the Wall Street consensus of $2.11.

"PayPal is the largest online payment platform, with leading e-commerce and mobile commerce market share, and millions of merchant partners, leveraging a proprietary cloud-based technology architecture," he wrote.

PayPal did not immediately respond to CNBC's request for comment.