PayPal Holdings (PYPL) came under pressure on Thursday after Morgan Stanley and Mizuho Securities issued bearish calls on the payments giant, cutting their rating to Sell from Hold. The dual downgrades come despite PayPal’s efforts to expand partnerships and invest in new technologies, including AI features and broader integrations across tech and financial platforms.
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Further, the downgrades add to a growing list of cautious Wall Street views, including Baird and Bank of America, as analysts reassess PayPal’s competitive position in a rapidly growing digital payments market.
Four Reasons Why Morgan Stanley Turned Bearish
Morgan Stanley analyst James Faucette pointed to four key concerns behind the rating downgrade. Let’s take a closer look at them:
1. Branded Checkout Losing Ground: The analyst believes thatPayPal’s core branded checkout business continues to face market‑share pressure from rivals like Apple (AAPL) Pay and Stripe (PC:STRPQ). Faucette said PayPal’s checkout upgrades have been “slow and complex,” making it harder for the company to regain momentum.
2. Heavy Competition in AI‑Driven Commerce: He also warned that emerging “agentic commerce”, or AI-driven automated purchasing, could become a major headwind. PayPal’s weaker technical integrations could put it at a disadvantage on future AI platforms, especially against rivals with stronger ecosystems.
3. Venmo Monetization Has Stalled: Faucette is especially bearish on Venmo, PayPal’s mobile payment app. He said PayPal “missed its window” to truly monetize the peer-to-peer platform. With competition growing across digital wallets and banking apps, Venmo’s long-term revenue growth potential looks limited.
4. Slower Growth and Margin Pressure Ahead: The analyst expects sluggish transaction margin dollar growth through 2028, citing share loss, take‑rate compression, and higher marketing costs. His updated forecasts now expect softer earnings and slower margin growth in the medium term.
Is PayPal a Buy, Sell, or Hold?
Turning to Wall Street, PYPL stock has a Hold consensus rating based on seven Buys, 19 Holds, and five Sells assigned in the last three months. At $75.91, the average PayPal stock price target implies a 27.15% upside potential.
