Could the Tides Turn for PayPal in Q4?

PayPal (NASDAQ:PYPL) is scheduled to announce its Q4 financials on February 1. However, negative developments around the stock indicate that Q4 is unlikely to change its course. 

It’s worth noting that PayPal stock underperformed the benchmark index in 2021 and continues to trend to lower. Headwinds stemming from eBay’s (NASDAQ:EBAY) payment migration, tough year-over-year comparisons, management’s cautious outlook amid retail supply-chain disruptions, and tight labor market remain a drag on PayPal stock. 

What’s Ahead in Q4?

PayPal stock has witnessed a couple of downgrades ahead of its Q4 results. BNP Paribas analyst Alexandre Faure downgraded PayPal stock to a Hold from a Buy. Faure expects PayPal’s premium valuation versus its peers to lead to a decline in its stock price in 2022. 

Similarly, Trevor Williams of Jefferies also downgraded PayPal stock, citing its valuation. He lowered the price target to $200 from $255. Williams sees muted growth for PayPal and doesn’t expect near-term estimates to expand. 

While Faure and Williams downgraded PayPal stock, John Davis of Raymond James reiterated his Buy rating. However, Davis lowered the price target to $229 from $264, stating that PayPal faces tough year-over-year comparisons in 1H22, which could keep its stock range-bound. 

Though PayPal could fail to impress with its near-term financial performance, its partnership with Amazon (NASDAQ:AMZN), acquisition of Paidy, growing pay-later footprint, and launch of a new digital wallet augurs well for long-term growth. 

Deutsche Bank analyst Bryan Keane remains upbeat about PayPal’s prospects and expects “revenue growth to accelerate to +20% Y/Y by 4Q22 with EPS potentially exiting the year growing +25% Y/Y as comps become easier.”

However, Keane sees limited upside in the near term, given difficult comparisons and ongoing supply-chain issues. 

PayPal Stock Forecast

PYPL’s stock forecast on TipRanks shows strong upside potential from current price levels given the recent selloff. To be precise, the average PayPal price target of $260.94 indicates 44.2% upside potential to current levels.

Further, most Wall Street analysts continue to show confidence in PYPL stock despite the near-term challenges. On TipRanks, PayPal has a Strong Buy consensus rating based on 26 Buy, 6 Hold, and 1 Sell recommendation.

Also, it scores a 9 out of 10 on TipRanks’ Smart Score system, implying that the stock will likely outpace the market averages.

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