PayPal Stock Drops as Analyst Downgrades Growth Outlook

PayPal Holdings saw a decline in its stock price on Tuesday following a downgrade by Daiwa Capital Markets analyst Kazuya Nishimura. Nishimura expressed concerns about the company's growth trajectory, prompting him to lower his rating on PayPal shares from Outperform to Neutral. He also reduced the price target from $64 to $62 in a report he released on Monday.

In his report, Nishimura mentioned two key factors that need to be addressed for PayPal's long-term earnings per share (EPS) growth. Firstly, he highlighted the importance of a clear growth trajectory for transaction margin dollars. Secondly, he emphasized the need for the benefits of increased investments to become apparent.

Nishimura remarked that despite PayPal's plans for execution in 2024, it may take some time before these service improvements are reflected in earnings. He added that determining the company's growth potential for EPS over the medium term might be challenging.

Earlier this month, PayPal announced quarterly earnings and revenue that exceeded estimates. However, the company provided full-year 2024 guidance that fell below analysts' expectations. This resulted in a mixed reaction from Wall Street.

PayPal has been facing tough competition from Apple Pay and Google Pay. Additionally, a recent Innovations event, where the company introduced an improved checkout process and refreshed PayPal app, didn't have a significant impact on investors.

As a result of these developments, PayPal's stock declined by 3.1% to $58.25 in Tuesday's trading. The stock has experienced a 5.2% drop so far in 2024 and a 25% decrease over the past 12 months.