Why Did Morgan Stanley Downgrade PayPal?

• The analyst also lowered PayPal’s price target to $51 from $74.
• Morgan Stanley warned that growth through 2028 would be sluggish due to share loss, take-rate degradation, 
• Morgan Stanley’s bearish outlook comes amid a series of other recent Wall Street downgrades.

PayPal Holdings Inc. (PYPL) received another Wall Street downgrade on Thursday, with Morgan Stanley turning bearish on the payments giant and sharply cutting its target price. The firm downgraded the rating to ‘Underweight’ from ‘Equal Weight’ and lowered its price target to $51 from $74.

Morgan Stanley lowered earnings and margin estimates for the payment provider, citing several reasons for its bearish outlook, according to TheFly. Morgan Stanley said improvements to PayPal’s branded checkout integrations will likely be "slow and complex," while dollar growth through 2028 is expected to be sluggish due to share loss, take-rate degradation, and lack of Venmo monetization.

The analyst also warned that agentic narrative could be an overhang on the shares.

Shares of PYPL fell 1.6% in Thursday’s pre-market trade.

The Street Consensus

Morgan Stanley’s downgrade of PayPal follows a slew of similar rating cuts from other analysts in recent times. Last week, Baird altered its rating on PayPal from ‘Outperform’ to ‘Neutral’ while lowering the price target from $83 to $66.

Bank of America also downgraded PayPal to ‘Neutral’ from ‘Buy’ and slashed its price target to $68 from $93, citing that the company’s efforts to revive growth are taking longer than expected, limiting near-term upside.

JPMorgan, Deutsche Bank, Evercore ISI, and Wells Fargo are among the analysts that lowered the firm’s price target.

On December 15, PayPal submitted applications to the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation to establish itself as an industrial bank.

How Did Stocktwits Users React?

On Stocktwits, the retail sentiment around PYPL remained ‘neutral’ over the last week, and message volume stayed at ‘high’ levels. The stock was ranked third on the platform at the time of writing.

One user commented that while PayPal is trying to become a bank, other banks are downgrading it.

Shares of PYPL are down nearly 30% in the past year.

For updates and corrections, email newsroom[at]stocktwits[dot]com.
 

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