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On Monday, Wolfe Research adjusted its outlook on PayPal Holdings Inc . (NASDAQ:PYPL), reducing the price target from $90.00 to $85.00 while maintaining an Outperform rating on the company’s shares. The revision comes as PayPal’s stock, currently trading at $65.15, has declined over 23% year-to-date and 8.2% in the past week alone, according to InvestingPro data. The revision reflects concerns over macroeconomic conditions and their potential impact on consumer behavior.
Wolfe Research analysts cited several factors for the adjustment, including signs of weakening consumer confidence, rising inflation expectations, and growing uncertainty around tariff policies. These elements are believed to affect PayPal, given its significant exposure to discretionary spending. Despite these challenges, InvestingPro data shows PayPal maintains strong fundamentals with a 40.5% gross profit margin and $6.8 billion in levered free cash flow. Retail transactions, which represent 52% of PayPal’s branded volumes, along with travel, media, entertainment, and food delivery services, could be particularly vulnerable in the current economic climate.
The analysts also adjusted their growth expectations for PayPal, forecasting 4-5% branded growth for the first quarter of 2025, a decrease from the last quarter’s 6% and the prior assumption of 5%. This aligns with InvestingPro’s revenue growth forecast of 4% for FY2025, while the company’s current diluted EPS stands at $3.99. Furthermore, the expected gross profit growth, excluding float, for the first quarter has been revised to 4.3% from the previous estimate of 5.4%. Despite these changes, the firm’s earnings per share (EPS) projection remains unchanged due to foreign exchange movements.
Wolfe Research’s end-of-year 2025 price target for PayPal is based on approximately 15 times their calendar year 2026 EPS estimate, which has been slightly adjusted to $5.67 from the prior $5.68. The new multiple reflects increased caution due to the broader macroeconomic uncertainties and specific challenges facing PayPal. According to InvestingPro’s Fair Value analysis, PayPal appears undervalued at current levels, with analyst targets ranging from $70 to $125. The firm’s analysis underscores the potential effects of the current economic environment on the payment processing giant’s financial performance. Get access to PayPal’s comprehensive Pro Research Report and 8 additional ProTips with an InvestingPro subscription.
In other recent news, PayPal Holdings, Inc. announced the issuance of $1.5 billion in senior notes, divided into three series, with varying maturity dates in 2028 and 2035. The offering was detailed in a recent SEC filing, and the notes are unsecured senior obligations that rank equally with PayPal’s existing and future unsecured indebtedness. Additionally, PayPal appointed Joy Chik to its Board of Directors, bringing her extensive experience in technology and AI to the company as it aims to integrate artificial intelligence into its services.
Analyst firms have also provided updates on PayPal, with Bernstein maintaining a Market Perform rating and a price target of $94, emphasizing the importance of PayPal’s international branded business. Meanwhile, Piper Sandler adjusted its outlook, lowering the price target to $76 while keeping a Neutral rating, following PayPal’s Investor Day where the company reiterated its financial guidance for fiscal year 2025. PayPal’s management has set ambitious targets for fiscal year 2027, aiming for high-single-digit growth in transaction margin dollars and significant increases in non-GAAP EPS.
In other developments, Apple (NASDAQ:AAPL)’s decision to open its iPhone’s NFC chip to third-party apps could impact PayPal and other digital wallet providers by enabling them to offer tap-to-pay functionality. This move may create opportunities for PayPal to expand its reach, although replicating ApplePay’s seamless experience poses challenges. These recent developments indicate PayPal’s strategic focus on growth and innovation as it navigates the evolving payments landscape.
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