PayPal (PYPL) is under pressure ahead of its fourth-quarter earnings report on February 3. Rothschild & Co Redburn downgraded the stock to Sell from Hold and slashed the price target to $50 from $70, citing growing competitive and structural challenges. PYPL stock is down about 1% in the pre-market trading session today.
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Analysts Warn PayPal’s Core Business Is Losing Ground
The firm argued that while PayPal should be well-positioned for the rise of “agentic commerce,” or AI-driven, automated online shopping, the company’s long-standing advantages are starting to weaken.
PayPal still boasts about 400 million active users, the largest base among payment platforms. However, the analyst noted that newer customers are increasingly choosing alternatives such as Shop Pay, Stripe Link, Apple Pay, Google Pay, and several other buy now, pay later (BNPL) wallets.
According to the analysts, agentic commerce will likely speed up this shift by boosting PayPal’s fastest-growing rivals, putting additional pressure on the company’s already high take rates. As a result, the firm expects PayPal’s branded checkout volumes to keep slowing, with growth flattening and take rates declining.
Since branded checkout accounts for more than 70% of PayPal’s net revenue, the analysts see little room for transaction margin dollars to grow. As a result, the firm has cut its 2027 and 2028 EPS forecasts by 15-25%.
PYPL’s Q4 Earnings and Revenue Expected to Grow
The downgrade adds to the uncertainty around PayPal as it prepares to report Q4 results. Investors wait to see whether the company can stabilize growth in its core branded checkout business or if growing competition will put even more pressure on it.
Currently, Wall Street analysts expect PayPal to report Q4 revenue of about $8.79 billion, up 5.5% year‑over‑year. Also, earnings are expected to rise 8.4% to $1.29 per share.
Is PayPal a Buy, Sell, or Hold?
Turning to Wall Street, PYPL stock has a Hold consensus rating based on four Buys, 20 Holds, and four Sells assigned in the last three months. At $68.21, the average PayPal stock price target implies a 22.88% upside potential.
