PayPal Faces Critical Earnings Test Amid Mounting Analyst Concerns

PayPal US70450Y1038

As PayPal prepares to release its quarterly financial results, a wave of skepticism from Wall Street analysts has cast a shadow over the upcoming report. Instead of optimistic previews, the payments giant is confronting a series of downgrades, signaling potentially volatile trading days ahead for investors.

All eyes are on February 3, 2026, the date set for PayPal’s earnings release. Company management has previously guided for an adjusted earnings per share range of $1.27 to $1.31, which would represent year-over-year growth of 7 to 10 percent. However, market experts are focusing less on the bottom-line profit and more on several key operational metrics that could reveal underlying challenges.

Concerns center on the core branded checkout business, where a growth deceleration compared to the third quarter is anticipated. Furthermore, the expansion of PayPal's active account base has slowed significantly, showing only a marginal 1 percent increase to 438 million accounts in the last period. A rare bright spot has been the "Buy Now, Pay Later" segment, where transaction volume grew by over 20 percent in the prior quarter.

Analyst Downgrades Highlight Structural Worries

The bearish sentiment was crystallized by a recent decisive move from Rothschild & Co. On January 28, the firm downgraded its rating on PayPal shares from "Neutral" to "Sell," simultaneously slashing its price target from $70 to $50. The rationale focused on fundamental business pressures: while PayPal's massive scale offers some protection, shifting consumer preferences toward newer payment alternatives are steadily eroding its once-formidable competitive edge.

This view finds support at Morgan Stanley, which reaffirmed its "Underweight" stance. Analysts at the bank also reduced their price target to $50, citing structural issues within the company. A primary criticism is the sluggish pace of technological renewal. Approximately 15 months after its introduction, only 25 percent of merchants have adopted PayPal's newer, more modern checkout platform. This slow adoption rate raises serious questions about the company's ability to respond swiftly to evolving market dynamics.

Strategic Moves Amid Market Pressure

Despite the negative momentum on the stock market—with shares currently trading exactly at their 52-week low of €44.12—PayPal continues to execute its strategic plan. In a bid to bolster its position in AI-driven commerce, the company recently announced the acquisition of Israeli fintech firm Cymbio. This move is intended to enhance the visibility of merchant products across new digital platforms.

The upcoming February 3 earnings report is shaping up to be a critical test. Should the key performance indicators, particularly those related to active user growth and the traditional checkout business, fail to meet the already modest expectations, further erosion in the stock price is a distinct possibility. Investors are braced for a period of heightened volatility as the market digests whether PayPal can navigate the intensifying competitive landscape.

@ boerse-global.de | US70450Y1038 PAYPAL