This payments stock gets fresh Buy ratings on Japan’s cashless opportunity

Investing.com -- Japanese payments firm PayPay Corp (NASDAQ:PAYP) received Buy-equivalent ratings from three Wall Street firms on Monday as analysts initiated coverage of the Softbank-backed company, with price targets implying roughly 20-30% upside from current levels at $21.

Jefferies initiated with a Buy rating and a $28 price target, while Bank of America and Wolfe Research each set price objectives at $26. All three brokers highlight Japan’s ongoing shift away from cash as the central long-term tailwind for the company, which listed on Nasdaq in March 2026.

Japan’s cashless penetration reached 42.8% in 2024, still well behind peers like South Korea at 99% and the United States at 64%, leaving what analysts see as a substantial runway for further growth. The Japanese government has set a target of roughly 65-80% cashless penetration over the longer term.

“Our bullish view is driven by PayPay’s unmatched leadership in Japan’s fast-growing cashless payments market, its massive user base and expanding ecosystem, and a clear trajectory for strong growth and margin expansion,” Jefferies analysts said.

PayPay dominates Japan’s QR-code payment segment with approximately 64% market share and around 72 million registered users, representing roughly 60% of Japan’s total population.

BofA noted that the company "reached $100bn in gross merchandise value (GMV) in just 6 years, the fastest achievement among global fintech peers."

Beyond payments, analysts pointed to PayPay’s expansion into banking and securities as a key monetization lever. The company acquired PayPay Bank and PayPay Securities in 2024, and with only around 14% of its payments users currently holding bank accounts, Wall Street sees significant cross-selling opportunity.

Jefferies forecasts operating profit to roughly quadruple from 35.5 billion yen in fiscal year ending March 2025 (FY3/25), to approximately 136 billion yen by FY3/29.

A central theme across all three initiations was operating leverage. As higher-margin credit and card transactions grow as a share of total payment volume, and as settlement costs continue to decline, analysts expect profit growth to consistently outpace revenue growth.

Adjusted EBITDA margins are forecast to expand from roughly 28% in FY2026 to around 35% by FY2028-29.

“We see a clear path for continued growth and margin expansion, driven by its diverse product portfolio, and believe our model embeds elements of conservatism on both top and bottom line,” Wolfe Research analysts wrote.

Key risks cited across the reports include intensifying competition from rivals such as Rakuten Pay and NTT Docomo’s d-Barai, potential regulatory tightening, rising credit costs, and the risk that SoftBank Group’s roughly 90% voting control could create conflicts with minority shareholders.

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