Analyst Downgrades PayPal to Neutral on Margin Pressures By Investing.com


© Reuters Analyst Downgrades PayPal (PYPL) to Neutral on Margin Pressures

By Senad Karaahmetovic

A Susquehanna analyst moved to the sidelines on PayPal (NASDAQ:) shares as he sees margins being negatively impacted by Braintree’s increasing share within PayPal’s Total Payment Value (TPV).

This “negative leverage” also prompted him to cut the price target to $100 from $115 per share.

“Piecing together intermittent disclosures, we estimate that Braintree accounted for 31% of PYPL’s TPV in 2021 and may reach 44% by 2023E, contributing roughly 72% of PYPL’s overall volume growth next year. As Braintree is likely to continue driving PYPL as a whole, its unit economics may drag on PYPL consolidated results,” he warned investors in a client note.

The analyst also claims that the market is underestimating these impacts on PYPL while valuation is also not helping as PYPL shares trade over 35% off the lows.

Moreover, the analyst is also concerned by the fact that FedEx (NYSE:) withdrew its guidance recently.

“Given PYPL’s high international exposure we note potential for weakness in shopper trends and PYPL’s TPV,” he concluded.

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