PayPal Faces Mounting Skepticism as Analysts Downgrade Stock

PayPal US70450Y1038

Within a single day, two prominent Wall Street firms rescinded their bullish ratings on PayPal Holdings, Inc., citing prolonged challenges in its core business. Bank of America and Baird both shifted their stances, underscoring growing impatience with the pace of the digital payment company's turnaround efforts.

The reassessments began on December 11, when Bank of America analyst Mihir Bhatia removed his "buy" recommendation. He simultaneously slashed his price target for the shares to $68 from a previous $93. The very next day, Baird followed suit, downgrading the stock to a "neutral" rating. Baird's analysts also significantly reduced their price objective to $66, down from $83.

The rationale from both firms reveals shared concerns about PayPal's trajectory. Central to the criticism is the disappointing performance of the company's branded checkout business, which has failed to reignite growth despite concerted efforts. Recent product updates and new checkout solutions have, so far, not delivered a meaningful boost. Analysts also point to the substantial investments required through 2026 to execute a successful recovery, noting that at current valuation levels, the risks appear to outweigh the potential for share price appreciation.

Bhatia acknowledged that CEO Alex Chriss has accelerated the pace of innovation and that the platform's foundation—with 400 million active consumer and merchant accounts—remains robust. However, without tangible evidence that the new strategic initiatives are gaining traction, a cautious outlook prevails.

Share Price and Valuation Under Strain

Market performance reflects this growing caution. Since the release of its quarterly earnings on October 28, PayPal's stock has declined by approximately 14.5%. Year-to-date, the loss stands at 28%. The company's valuation metrics now trade at a discount to industry peers, with a forward price-to-earnings ratio of 10.6 and a price-to-cash-flow ratio of 8.4. This compares to a sector average P/E of 13.8.

Sentiment among covering analysts is mixed. Out of 31 market experts surveyed, 19 currently advise holding the stock, nine recommend buying, and three suggest selling. The consensus average price target, hovering between $79 and $81, still implies a potential upside of nearly 30% from recent levels. Nevertheless, the latest downgrades signal that confidence in achieving those targets is eroding.

A Crypto Partnership Provides a Silver Lining

Amid the concerns, PayPal has secured a notable development in the cryptocurrency sector. The company announced that YouTube will now offer U.S.-based content creators the option to receive their revenue in PayPal's stablecoin, PYUSD. May Zabaneh, who leads PayPal's crypto division, confirmed the launch of this functionality. PYUSD has grown to become the sixth-largest stablecoin by market capitalization, which now stands at $3.9 billion.

Whether this advancement will be sufficient to alleviate the broader skepticism on Wall Street remains an open question. For now, worries about the fundamental payment processing business continue to dominate the investment narrative.