Atlantic Equities took a step back on PayPal (NASDAQ:PYPL), shifting their rating from Overweight to Neutral and slashing their price target to $72. Why, you ask? Well, they’re a bit jittery about the competitive landscape and the pressure on transaction margins. Analyst Kunaal Malde had hoped PayPal’s top-line growth stability, strong earnings, and attractive valuation would give the stock a leg up. But the shadow of competition looms large, derailing those expectations. As a result, this initially caused PYPL’s share price to fall, although it has since recovered at the time of writing.
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Malde doesn’t see a magic bullet that could quickly beef up PayPal’s market share or transaction margins. This makes it a bit murky to pin down exactly what could spark a revival of investor love for the stock in the short term, even with new leadership in the mix. And while he thinks PayPal’s earnings estimates for the near future are within reach, he’s a bit worried. Cost cutting can only prop up earnings growth for so long. Beyond that, PayPal needs to rely more on gross profit growth, which isn’t exactly a walk in the park. With competition breathing down its neck, PayPal’s valuation could be stuck in a rut for a while.
Overall, Wall Street analysts have a consensus price target of $91.92 on PYPL stock, implying 44.28% upside potential, as indicated by the graphic above.
