PayPal: AI and Agentic Commerce Efforts Insufficient to Offset Structural Headwinds, Justifying Sell Rating

In a report released yesterday, James Faucette from Morgan Stanley maintained a Sell rating on PayPal Holdings, with a price target of $51.00.

James Faucette has given his Sell rating due to a combination of factors related to PayPal’s competitive position and execution challenges. He views the Cymbio acquisition as strategically aligned with the rise of AI-driven, agentic commerce and potentially helpful for making merchants’ product catalogs more discoverable through AI platforms, but too small to materially influence PayPal’s overall financial profile or alter his outlook on revenue, margin, and EPS trends. In his view, the company’s current estimates still point to modest transaction margin growth, margin pressure, and only moderate earnings expansion, which do not compensate for structural headwinds in the core business.
Faucette’s primary concern is that PayPal’s AI partnerships and tools, including the Cymbio integration, do not solve the central issue of ongoing consumer checkout share losses, particularly among younger users who have already migrated away from PayPal and Venmo. He argues that if PayPal is not chosen at the initial point of purchase, it risks being excluded from future agent-driven transactions, since shopping agents favor consistent, low-friction payment methods with strong authorization performance. He also highlights significant hurdles in scaling agentic commerce, including fraud systems that currently block most bot-like activity and PayPal’s slow progress in upgrading merchant integrations, as evidenced by the limited rollout of its optimized checkout. Taken together, these factors lead him to conclude that recent strategic moves are insufficient to offset competitive and execution risks, supporting a Sell rating on the stock.

Faucette covers the Technology sector, focusing on stocks such as Fiserv, Block, and Klarna Group Plc. According to TipRanks, Faucette has an average return of 4.3% and a 62.83% success rate on recommended stocks.

In another report released on January 20, Truist Financial also maintained a Sell rating on the stock with a $58.00 price target.