Here's why Wall Street has been turning bearish on PayPal's stock
PayPal (PYPL) has entered into or expanded partnerships with some of the biggest names in tech this year, including Google (GOOG), OpenAI and Coinbase (COIN).
It's also forged new deals in the massive business of college sports in the United States, began implementing agentic AI into its services, while its subsidiary Venmo has now entered the mortgage space.
All in all, it's been a big year for PayPal.
But judging by the way Wall Street has lately been treating its stock, investors would be forgiven if they assumed the payments company has been on an extended losing streak.
When Baird analysts, led by Colin Sebastian, downgraded PYPL on Friday, it marked the third downgrade the shares have received in the first two weeks of December.
Sebastian downgraded the stock to Neutral from Outperform, while also cutting his price target 20.5% to $66 from $83. Although Sebastian remains bullish on PayPal's future growth, he argues that the "near-term catalysts are lacking" for the company, and also cites "uneven transaction volume thus far in Q4."
"We remain constructive long-term given opportunities to improve branded checkout, accelerate Venmo monetization, and build the foundation of agentic commerce/payments infrastructure," he addd. "However, we expect shares to be range bound until they contribute sustainably to market share gains."
Baird's assessment of the company's prospect seem to be in line with how other analysts are viewing the stock: While PayPal has taken steps this years to ensure growth, the gains are not going to be realized immediately.
A strong Q3 is not enough to bolster near-term confidence
On Thursday, BofA Securities analysts, led by Jason Kupferberg, downgraded the company's shares to Neutral from Buy, while cutting their price target to $68 from $93.
Kupferberg noted that "long-term potential acknowledged, but lack of near-term visibility tempers outlook." Like Sebastian, he also cited lower volume in the fourth quarter that will result in "a step down in branded checkout growth and 2026 will be an investment year."
When a company has a year in which it makes heavy investments, it will naturally also lead to significant losses in the immediate future.
"PYPL's effort to reinvigorate growth in its core branded checkout is taking longer than expected and limits near-term upside, in our view," Kupferberg wrote. "We had expected product innovation and the upgraded checkout experience to drive increased usage of the PayPal button at checkout."
JPMorgan analysts, led by Tien-tsin Haung, downgraded PYPL earlier this month to Neutral from Overweight and cut their price target 17.6% to $70 from $85.
Haung's assessment was very similar to Sebastian's, writing that PayPal has "constructive long-term potential," but he also sees "muted near-term catalysts."
But Haung's note on the company was decidedly bullish, despite any concerns about the lack of immediate results.
"Our survey work shows how dominant PayPal's brand remains, and we trust new management can wake this sleeping giant," he wrote.
Alex Chriss was named president and CEO of PayPal in 2023 and Haung said that the company has "accelerated product velocity" and "maintained operational vigor" under his leadership.
While Wall Street might be turning bearish on its near-term prospects, PayPal actually delivered a solid performance in its latest earnings, which might be the ultimate indication of near-term progress.
The company reported $1.34 earnings per share for the third quarter, compared to analyst expectations of $1.20. PayPal also reported $8.42 billion in revenue for Q3, compared to Wall Street's expectation of $8.24 billion.