On Wednesday, Mizuho (NYSE: MFG ) analyst Dan Dolev discussed PayPal Holdings Inc (NASDAQ: PYPL ).'s potential growth strategies ahead of its upcoming investor day on February 25, under the leadership of its new CEO. The firm highlighted the possible positive impact of PayPal's non-payment initiatives, particularly its new advertising platform, on the company's revenue and transaction margins.

PayPal is developing an advertising platform, led by Mark Grether, the former head of Uber (NYSE: UBER )'s advertising business. Grether's experience includes scaling Uber's ad revenue to over $1 billion. Mizuho analysts believe that if PayPal successfully deploys its advertising strategy across its Branded Checkout and Venmo services, it could see a 5-10% increase in total revenue, with an even more significant effect on transaction margin dollars.

The analysts used Uber's advertising revenue, which exceeds $1 billion and is growing at more than 80% year-over-year, as a benchmark for PayPal's potential. Even with a conservative estimate, applying a 50% reduction to Uber's advertising average revenue per user, Mizuho forecasts an ad revenue potential of approximately $1.7 billion for PayPal and $600 million for Venmo. This could translate to around a 7% increase in PayPal's total revenue.

A comparison of user engagement across various platforms indicates that PayPal and Venmo have substantial opportunities for growth in the advertising sector. With over 400 million active accounts and more than 35 million merchants, PayPal's two-sided network positions it favorably to leverage its scale and data for a successful ad business.

Mizuho values PayPal at 17 times its estimated 2026 earnings per share, which is a slight premium to the median forward price-to-earnings multiple of the legacy payments group, but less than the historical average premium PayPal has commanded. The firm maintains an "Outperform" rating on the stock, with a price target of $96, reflecting confidence in PayPal's transaction margin growth and the potential of new initiatives like the improved user experience and Fastlane.

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