PayPal Shares Under Pressure as Major Funds Reduce Stakes

PayPal US70450Y1038

PayPal's stock began the week facing significant headwinds. The dual pressures of substantial share sales by institutional investors and a mixed reception on Wall Street to its new banking ambitions have dampened sentiment. Hopes for a year-end rally are being overshadowed by prevailing caution and skepticism among traders.

From a fundamental perspective, the market's attention is now shifting to February 2026. At that time, PayPal must demonstrate that its holiday quarter performance was robust enough to achieve its full-year 2025 earnings target of $5.35 to $5.39 per share. Technically, the immediate focus is on defending the psychologically significant $60 level. A sustained break below the $58 support zone could trigger additional selling pressure, potentially bringing the stock's annual lows back into view.

The shares closed at $59.97 on Friday, hovering perilously close to critical technical thresholds. Despite currently trading at a price-to-earnings ratio of approximately 12—which appears attractive on the surface—and having exceeded expectations in the third quarter, the stock lacks a clear growth narrative. It continues to trade roughly 81% below its all-time highs.

A Strategic Pivot and Its Associated Risks

The recent reassessment by analysts is largely tied to PayPal's application for an "Industrial Loan Company" (ILC) bank charter with U.S. regulators. The company aims to launch "PayPal Bank," a move designed to reduce dependence on third-party partners and enable it to issue loans directly to small businesses. While this strategy could logically improve margins, it introduces a significant drawback: operating as a bank would subject the fintech firm to the stringent regulatory oversight traditionally applied to financial institutions.

This trade-off is giving many investors pause. The strategic expansion into banking, though potentially lucrative, comes with a new set of compliance burdens and capital requirements that could constrain agility.

Institutional Investors Scale Back Holdings

Data revealing notable position reductions by major investment firms emerged over the weekend, delivering sobering news for shareholders. The actions point to diminishing confidence among professional market participants.

Capricorn Fund Managers cut its stake by 34.9% during the third quarter. Similarly, Carnegie Investment Counsel reduced its holding by 22.6%. In a related development, analysts at UBS lowered their price target for PayPal shares from $80.00 to $65.00. They expressed doubt that cost-cutting measures and the new banking ambitions alone would be sufficient to reignite sustainable growth.