MoffettNathanson analysts downgraded PayPal (NASDAQ:PYPL) to Market Perform from Outperform and set a new price target of $75 per share.
The move comes ahead of the arrival of the new CEO, Alex Chriss, who will replace the outgoing CEO, Dan Schulman.
“While we are excited for the fresh start at PayPal under new CEO Alex Chriss, we believe it will, unfortunately, likely continue to be a challenging road ahead for the company in the coming year. As a result, we are hitting the ‘reset button’,” the analysts wrote in a client note.
They continue to expect that PayPal’s gross profit growth will “remain lackluster,” or in the low- to mid-single digits. As a result, the analysts see the potential for further downside to our estimates.
“Gross profit growth (a preferred metric because it reflects the wide disparity in GP margins across segments), has flattened (~0-1% growth in 2022 and 2023 YTD), and we expect it to remain anemic (gross profit growth in the low- to mid-single digits), with potential downside risk if the competitive intensity in branded (from Apple Pay) and/or unbranded checkout (e.g., from Adyen or Stripe) intensifies,” they further noted.
PayPal shares fell 1.5% on the news.