Shares of digital payments provider PayPal (PYPL) have dropped to $202.03, after posting mixed Q3 results earlier this week.
A weaker-than-expected Q4 guidance and the expected transition of eBay (EBAY) to its own payments system are some of the factors weighing on the stock. Meanwhile, PayPal has teamed up with Amazon (AMZN), and shoppers will now be able to checkout with Venmo.
With these developments in mind, let’s take look at the changes in PayPal’s key risk factors that investors should know. (See Insiders’ Hot Stocks on TipRanks)
Risk Factors
According to the TipRanks Risk Factors tool, PayPal’s top risk category is Legal & Regulatory, accounting for 24% of the total 29 risks identified, against a sector average of 18%. In its recent Q3 report, the company changed two key risk factors under the Legal & Regulatory risk category.
Firstly, PayPal highlighted that its business is subject to government regulation and oversight. Any failure to comply with these requirements, which are complex, overlapping, and change frequently can have an adverse effect on its business.
Additionally, the company’s cryptocurrency offerings are expanding, and the number of markets where it provides these offerings are increasing too. Crypto regulation is an evolving area, and the company could be subject to additional regulations and requirements.
Secondly, PayPal also noted that the use of its payments services for illegal activities could harm its business. Any such illegal use could lead to government enforcement, or regulatory authorities seeking to impose restrictions or liability on PayPal.
Moreover, one activity that can be legal in one jurisdiction may be illegal in another, which may result in liability for PayPal. Any threatened or adverse claims against the company could lead to reputation loss, impact on transaction volume, or higher costs for PayPal.
Wall Street’s Take
On November 9, Berenberg Bank analyst Tammy Qiu reiterated a Buy rating on the stock with a price target of $310.
The analyst believes growth in 2022 is achievable for PayPal, driven by factors such as ramp-up of its relationship with Amazon, a decreasing negative impact from eBay, more functions being launched in its Super App, the launch of services such as Buy Now Pay Later in new regions, and recovery in online shopping once supply chain bottlenecks ease.
Consensus on the Street is a Strong Buy based on 22 Buys, four Holds, and one Sell. The average PayPal price target of $280.48 implies a potential upside of 38.8% for the stock.
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