PayPal Cuts Amid Bernstein’s Concerns Over Competitive Pressures

Analysts at Bernstein have downgraded PayPal from “Outperform” to “Market-Perform,” expressing concerns over increasing competitive pressures and uncertainty regarding the company’s long-term growth prospects.

Although Bernstein raised its price target for PayPal’s stock from $75 to $80, they cautioned that the stock’s recent performance limits its upside potential. The firm initially upgraded PayPal at the end of July due to improved product execution and management. However, they highlighted ongoing challenges, which they described as “push/pull dynamics.”

These dynamics include fierce competition in its core services and potential benefits from share buybacks, cost reductions, and new monetization strategies. Bernstein expressed apprehension about the significant pressures on PayPal’s main product, which remains comparatively expensive relative to its rivals.

Additionally, the company’s new initiatives, such as the campaign promoting rewards on PayPal cards, have yet to demonstrate a meaningful effect on consumer behavior or gross profit.

Venmo, an essential component of PayPal’s portfolio, has also lost market share in peer-to-peer transactions, while recent pricing changes at Braintree have raised further questions regarding its future growth.

Despite growing investor interest in PayPal’s Fastlane initiative, particularly in partnerships with other firms, Bernstein cautioned that the benefits of this development may take several years to materialize, and the expected financial impact may fall short of optimistic predictions.

Lastly, the firm expressed concerns about potential negative adjustments to PayPal’s gross profit due to its vulnerability to changing interest rates, which may pose a challenge to growth in 2025. Given the broader range of potential long-term outcomes amid market and competitive pressures, Bernstein has decided to take a more cautious stance with PayPal.