PayPal Faces Mounting Skepticism as JPMorgan Withdraws Bullish Stance

PayPal US70450Y1038

The mood surrounding PayPal Holdings Inc. has turned decidedly cautious. In a significant shift, analysts at banking giant JPMorgan Chase have rescinded their prior buy recommendation for the digital payments leader, simultaneously slashing their price target. This move underscores a growing concern on Wall Street that the company's core growth engine is losing momentum, placing its management under intense pressure to execute a turnaround.

On December 4, JPMorgan downgraded PayPal's stock rating from "Overweight" to "Neutral." The firm's analysts also made a sharp reduction to their price objective, cutting it from $85 to $70 per share. In their assessment, 2026 is framed as a critical "show-me year" for the company. The central cause for this newfound skepticism is a deceleration in growth for PayPal's branded checkout business—transactions explicitly completed using the PayPal button. While this segment grew by 5% in the third quarter, company guidance suggests that figure will drop to approximately 3% for the final quarter of the year.

This emerging trend is viewed as a potential signal of deeper, structural challenges. Despite substantial investments in artificial intelligence-driven commerce tools and its "Buy Now, Pay Later" (BNPL) services, PayPal is struggling to effectively counter mounting competitive threats.

Competitive Pressures Intensify

JPMorgan's downgrade is part of a broader wave of analyst caution. Deutsche Bank recently followed a similar path, lowering its own price target from $75 to $65. Sentiment across the payments sector has cooled noticeably, with market strategists now showing a preference for firms with strong pricing power over those seen as recovery plays. The competitive landscape is exacerbating PayPal's difficulties: Apple Pay continues to capture share in mobile commerce, while rivals like Affirm and Klarna are aggressively expanding in the installment payments space.

Even a massive capital return program has failed to bolster the share price. Since 2022, PayPal has deployed roughly $21.5 billion toward share repurchases. Nonetheless, the stock remains deeply negative for the year.

Operational Performance Offers a Silver Lining

Amid the pessimistic outlook, PayPal's underlying business operations show resilience. The company's third-quarter results exceeded market expectations, delivering earnings of $1.34 per share on a 7.3% increase in revenue. A newly announced partnership with AI search engine Perplexity also provides a glimmer of innovation, aiming to integrate PayPal's payment solutions directly into AI-powered search results.

Technical and Valuation Picture Reflects Concerns

The stock's technical condition mirrors these fundamental worries. Having declined more than 36% since the start of the year, PayPal stands as one of the market's clear underperformers. Shares recently traded around €53.50, hovering just above their 52-week low. A nearly 11% gap below the 200-day moving average further confirms the persistent downward trend.

For investors, the situation demands patience. While the stock's valuation appears superficially attractive at a price-to-earnings ratio of about 12.5, the market lacks confidence in a sustainable return to accelerated growth. The burden now falls on CEO Alex Chriss to demonstrate over the coming quarters that his strategic adjustments are taking hold and that market share erosion can be halted.