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On Wednesday, Wells Fargo (NYSE:WFC) analyst Andrew Bauch revised the price target for PayPal Holdings Inc . (NASDAQ:PYPL) shares, reducing it to $74 from the previous $80, while maintaining an Equal Weight rating on the stock. With a current market capitalization of $61.33 billion and a P/E ratio of 15.46, PayPal trades at levels that InvestingPro analysis suggests may be undervalued. Bauch’s analysis highlighted several challenges faced by the company, including a quarter four branded Total (EPA:TTEF) Payment Volume (TPV) miss compared to market expectations, management guidance perceived as aggressive, and persistent competition concerns.
PayPal’s year-to-date performance had already been weaker than the broader market, with a decline of 21% compared to the S&P 500’s 4% drop. The analyst pointed out that recent tariff news and recession fears have further pressured investor sentiment, particularly regarding discretionary spending and cross-border exposures.
According to Bauch, PayPal’s revenue is significantly impacted by consumer-oriented transactions, with about 90% of its revenue coming from such activities. Additionally, 40% of the company’s revenue and Gross Payment Volume (GPV) is from international sources, with a high percentage of discretionary spending, and cross-border revenues are higher than the reported 12% GPV mix. Despite these concerns, management has noted that over 50% of its cross-border volume is within the European Union, and there has been a shift in vertical mix toward less discretionary spending over time.
For the first quarter, the analyst expressed skepticism about the Street’s expectations for a 5.5% growth in FX-neutral branded volume, suggesting that this may be overly optimistic. On the other hand, strong engagement data from Venmo could contribute to growth, supported by recent Pay with Venmo initiatives.
Looking at transaction margins, Bauch observed an improvement in 2024, driven by branded stability, Braintree take rates, and Venmo monetization. However, he sees potential risk to the first quarter and full-year 2025 guidance towards the lower end for transaction margins and has adjusted his first-quarter estimate to a 4% growth, down from the previous 5%, due to foreign exchange impacts and a softening macroeconomic environment.
While the analyst has slightly lowered his full-year 2025 estimates, he believes that adjusted earnings per share, forecasted between $4.95 and $5.10, may be protected by PayPal’s capacity for stock buybacks. Overcoming the bearish view that management’s medium-term targets are overly ambitious will require a clearer path to high single-digit branded volume growth by 2027, which Bauch suggests may be challenging to demonstrate at the current time.
In other recent news, PayPal Holdings Inc. has been the focus of several analyst revisions and company updates. BofA Securities adjusted PayPal’s price target to $93 from $103, maintaining a Buy rating, citing macroeconomic challenges. Meanwhile, Baird lowered its price target to $78 from $95, retaining an Outperform rating, due to potential credit risks and revised 2025 revenue estimates. Susquehanna also reduced its price target to $94 from $101, though it kept a Positive rating, reflecting macroeconomic volatility. Evercore ISI initiated coverage with an In Line rating and a $65 price target, noting challenges in execution despite PayPal’s scalable assets. Additionally, PayPal announced that Rodney C. Adkins, a board member since 2017, will retire in June, as acknowledged by Chair Enrique Lores and CEO Alex Chriss. These developments come as PayPal navigates a complex economic environment and continues to focus on strategic initiatives.
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