By Emily Bary
PayPal’s stock is on track to rise for the eighth session in a row, but analysts have a hard time making a call about the future
PayPal Holdings Inc. has been a “battleground stock,” according to Bernstein analyst Harshita Rawat – with some investors worried about competition for the company’s core checkout busines, and others hopeful that the current management team will be able to execute better than past leaders.
Looking at a short window, PayPal’s stock (PYPL) is on a hot run – on track to log its eighth session in a row of gains Friday, and ahead almost 8% over that period. If the stock ends in positive territory on the day, it would clinch its longest winning streak since a 10-session one that ended April 13, 2021, according to Dow Jones Market Data.
Taking a wider view presents a different picture, however, with PayPal shares off about 75% from their all-time closing high achieved in July 2021 and off 8% so far this year.
The next big catalyst for PayPal’s stock is Tuesday morning’s earnings report, and Rawat sees a “favorable setup” going into that. There have been seemingly strong and stable e-commerce trends in the period and there’s the potential for currency benefits from the weaker U.S. dollar DXY, though she acknowledged that PayPal has “a fairly robust hedging program which can mute the impact” of the currency trend.
In general, the company has “improved product velocity” and it seems to be see growing traction with its debit card, Rawat added.
Trevor Williams of Jefferies expects the company to beat on transaction gross profit and transaction margin dollars, but he thinks investors will be most focused on branded total payment volume – and he’s less upbeat about the trend there. He wrote in a note to clients last week that he thinks branded volume growth slowed in the second quarter due to tariff-related pressures on Chinese e-commerce platforms like Temu (PDD) and Shein.
See also: Earnings push Fiserv’s stock toward its worst year since 2008. Here’s what worries Wall Street.
“Without visibility into a branded acceleration above mid-single digits (we believe not likely by [year-end]), we don’t see what drives the story forward out of the print,” Williams wrote. He predicted 5% growth in branded volume on a currency-neutral basis for the second quarter, down from the 6% rate seen in the first quarter after excluding Leap Day impacts.
Williams is on the sidelines when it comes to PayPal’s stock, recently maintaining his neutral rating. Bernstein’s Rawat also stuck with her market-perform call.
The stock could either wind up a “multibagger” with big returns or be “a structural short” over a three-year timeframe, Rawat wrote. “The problem: We currently lack conviction on which outcome is more likely,” she noted.
-Emily Bary
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