Argus analysts downgraded PayPal (NASDAQ:PYPL) stock to Hold from Buy on Thursday following the financial technology firm’s latest earnings report.
Analysts said PayPal released a “disappointing EPS guidance” for the first quarter and the full fiscal 2024, while its recently unveiled innovation efforts are expected to take time before meaningfully boosting the company’s bottom line.
“We expect weaker overall growth in payment volumes for PayPal in 2024 amid higher interest rates and rising competition. Separately, we note PayPal has a new CEO as of September 2023, and a new CFO as of November 2023,” analysts wrote in the note.
However, Argus’s long-term rating on PYPL remains buy, the investment research firm said.
To be more specific, analysts believe PayPal possesses several competitive advantages as it strives to boost payment volumes, including a strong international presence (100 million non-US users across over 200 countries).
“The company also provides merchants with end-to-end payment authorization and settlement capabilities, as well as instant access to funds,” Argus analysts wrote.
Looking ahead, they believe that in the long run, PayPal stands to benefit from the secular trends that have enhanced growth for credit card processors. These trends include the growing preference for digital payments over traditional methods like checks and cash, driven by factors such as convenience and security.
“We expect further market share gains as the company leverages its platforms globally and takes advantage of its strong brand recognition and rapid growth in merchant acceptance,” analysts said.