Analyst Sentiment Shifts as PayPal’s Core Business Faces Scrutiny

PayPal US70450Y1038

A growing sense of caution is emerging among Wall Street analysts regarding PayPal's outlook. The digital payments giant finds itself at a crossroads, presenting a mixed picture of solid quarterly earnings and new opportunities in China against mounting doubts about the future growth of its flagship branded checkout service.

A wave of rating adjustments has swept through analyst coverage this month, signaling a broad reassessment of PayPal's near-term trajectory. The consensus view is now firmly anchored at "Hold."

Notably, Bank of America (BofA) made a significant revision, downgrading its recommendation from "Buy" to "Neutral." The firm slashed its price target by approximately 27%, from $93 to $68 per share. Analyst Mihir Bhatia cited weaker-than-anticipated progress in the critical branded checkout segment—the familiar PayPal button at online merchants—as the primary reason. Bhatia now anticipates a "noticeable decline" in this segment's growth for the fourth quarter of 2025 and has consequently reduced his profit estimates for 2026 and 2027 by 2% and 4%, respectively. He framed 2026 more as a "year of investment" than one of robust growth, pointing to higher expenses needed to reignite momentum.

BofA's move was part of a broader trend:
* JPMorgan: Downgraded from Overweight to Neutral, cutting its target from $85 to $70.
* Deutsche Bank: Lowered its target from $75 to $65, maintaining a "Hold" rating.
* Evercore ISI: Reduced its target from $75 to $65, keeping an "In-Line" rating.
* Wells Fargo: Trimmed its target from $74 to $67, with an "Equal-Weight" rating.
* Compass Point: Set a target of $56.

The aggregate analyst stance currently shows 19 recommending Hold, nine advising Buy, and three suggesting Sell. The average price target sits near $79, indicating theoretical upside but reflecting eroded confidence in a clear short-term growth path.

The Heart of the Problem: Slowing Branded Checkout Growth

The catalyst for this reassessment was commentary from PayPal's own management at the UBS Global Technology and AI Conference 2025. Executives indicated that growth in the branded checkout business would slow by "at least a few points" in Q4 compared to Q3, facing a tougher year-over-year comparison.

This segment is central to PayPal's identity and competitive position. The concern among experts is that weakness here suggests market share is being ceded to other digital wallets and alternative payment methods. A particularly worrying sign is that growth in branded checkout volume is lagging behind the overall expansion of e-commerce, raising long-term questions about PayPal's market position.

Compounding the issue is PayPal's customer base composition. BofA notes the company has greater exposure to middle- and lower-income households, making it disproportionately reliant on retail and discretionary spending. PayPal has itself signaled ongoing consumer softness extending into November 2025, creating a challenging mix of slowing core growth and cautious spending for a transaction-volume-driven business model.

Glimmer of Hope from the East

Amid the skepticism, a potential long-term positive emerged. China's Vice Commerce Minister, Ling Ji, recently met with PayPal's Global Vice President, Richard Nash. The engagement signals Chinese openness to new cross-border e-commerce models involving PayPal, potentially unlocking future opportunities within one of the world's most crucial online retail growth markets. While concrete financial impacts are not yet foreseeable, access to this ecosystem could eventually counterbalance current weaknesses in established markets.

Market Performance Echoes the Uncertainty

The stock market has mirrored this cautious outlook for weeks. Shares recently traded at €52.23, standing approximately 41% below their 52-week high of €89.31 and down nearly 38% year-to-date. This persistent pressure continues despite PayPal's better-than-expected Q3 earnings report in late October, which saw the company raise its full-year forecast. The share price has fallen over 14.5% since that report, underscoring how doubts about sustainable growth quickly overshadow positive results when the core business stumbles.

In summary, PayPal is navigating a transitional phase. The company must demonstrate that its investments in product and platform can re-accelerate the branded checkout business, while any potential momentum from China will likely only materialize in financial results gradually over the medium term.