PayPal (NASDAQ: PYPL) fell to a 52-week low on Wednesday after two major research firms downgraded the stock, citing slowing growth and rising competitive pressures.
Key Points
- Morgan Stanley cut PayPal’s 2026 branded checkout growth forecast to 3.3% from 3.9%.
- Only about 25% of merchants have migrated to PayPal’s upgraded checkout system, with roughly half using the optimized version.
- Morgan Stanley lowered PayPal’s 2026 adjusted EPS estimate to $5.79 and reduced share repurchase plans to $4.5 billion.
- Rothschild Redburn downgraded PayPal to “Sell” and cut its price target to $50 from $70, citing competitive threats from agentic commerce.
- PayPal shares are trading at $54.25, down more than 40% from their 52-week high.
Morgan Stanley Flags Slowing Checkout Growth
Morgan Stanley trimmed its price target on PayPal to $50 from $51 and reiterated its “Underweight” rating, citing weakening performance in the company’s branded checkout segment.
In addition, the firm lowered its 2026 branded checkout growth forecast to 3.3% from 3.9%. Moreover, it reduced its expected growth in transaction-margin dollars to 3.4%. Morgan Stanley attributed the revisions to cautious management commentary and softer e-commerce trends toward the end of last year.
Furthermore, the firm highlighted execution challenges. Adoption of PayPal’s upgraded checkout integrations has progressed more slowly than anticipated, with only about 25% of merchants migrating to the new system over the past 15 months. Of those, roughly half are using the most optimized version, thereby limiting potential gains in conversion rates.
Capital Allocation and Earnings Estimates Revised
Consequently, these operational headwinds fed into broader financial adjustments. Morgan Stanley cut its estimate for PayPal’s 2026 share repurchases to $4.5 billion, or about 75% of free cash flow. This revision comes down from an earlier forecast of $5.4 billion.
The firm also lowered its 2026 adjusted EPS estimate to $5.79 and warned that competitive pressures may have intensified during the recent holiday shopping season. According to the note, the risk is most pronounced in the U.S., which accounts for roughly 40% of PayPal’s branded checkout volume.
Rothschild Redburn Takes a More Bearish Stance
While Morgan Stanley modestly reduced its expectations, Rothschild Redburn took a more decisive step. The firm downgraded PayPal to “Sell” from “Neutral” and slashed its price target to $50 from $70.
This downgrade reflects a broader reassessment of the payments landscape. Rothschild Redburn pointed to the rise of agentic commerce as a potential disruptor that could reshape competitive dynamics and erode PayPal’s advantages relative to established card networks.
The firm cited two key factors underpinning its view. First, pricing power may shift away from large merchants as online retail becomes increasingly fragmented. Second, greater automation could drive higher demand for cybersecurity and risk management services—areas where Visa (NYSE: V) and Mastercard (NYSE: MA) are particularly well positioned.
More Optimism for Card Networks
In contrast to its stance on PayPal, Rothschild Redburn raised its earnings outlook for the major card networks. Specifically, the firm boosted its 2028 EPS estimates by about 10% for Visa and approximately 5% for Mastercard.
Furthermore, it increased Visa’s price target to $385, implying roughly 18% upside from current levels. Although Mastercard’s target was reduced to $685, the firm still sees potential upside of around 30%, according to the research note.
PayPal Stock Performance
As of this writing, PayPal shares (NASDAQ: PYPL) are trading at $54.25, down more than 40% from their 52-week high of $90.93. The stock has declined by more than 9% over the past month, thereby highlighting persistent downward momentum. Meanwhile, PayPal’s market capitalization currently stands at approximately $50.8 billion.
Keep up with financial stocks by checking our Finance Stock updates
