Jefferies Downgrades PayPal to Neutral, Shares Drop 3%

PayPal (NASDAQ:PYPL) shares fell more than 3% intra-day today after Bernstein SocGen analysts downgraded the company to Market Perform from Outperform, adjusting their price target to $80 from $75.

The firm’s earlier upgrade in July was based on PayPal’s improved product momentum, effective execution under new leadership, enhanced gross profit growth, and compelling valuation. However, following the stock's recent performance, the analysts noted limited upside potential from current levels. According to them, PayPal’s path ahead is clouded by conflicting dynamics—pressures on its core payment button from intense competition contrasted with positive impacts from buybacks, operational cost reductions, and new monetization efforts.

Due to the wide range of possible outcomes for PayPal, the analysts are opting to wait for clearer signs on several fronts, including the long-term prospects of PayPal’s core button, the impact of initiatives such as rewards, Fastlane, offline/cards, Venmo monetization, and Ads, as well as the influence of Braintree's recent pricing adjustments. The analysts also highlight potential risks to gross profit estimates heading into 2025, given PayPal’s exposure to interest rate fluctuations.