PayPal Faces Unbranded Margin Pressure: 5 Analysts On Q1 Print

Shares of PayPal Holdings Inc PYPL tanked in early trading on Tuesday, despite the company reporting upbeat quarterly results.

Here are some key analyst takeaways from the earnings release.

Susquehanna On PayPal Holdings: Analyst James Friedman reiterated a Neutral rating while reducing the price target from $80 to $78.

“PYPL delivered what we thought was a very coherent and focused message around their unbranded (Braintree) product,” Friedman said in a note.

If the new strategy works, it will be “due to the margin stabilization — and eventual accretion — from unbranded (Braintree), as they move down market and overseas and add services like Risk, Omni, Payouts and FX,” he added.

Needham On PayPal Holdings: Analyst Mayank Tandon reaffirmed a Hold rating on the stock.

PayPal’s first-quarter results were “solid” and came in “above expectations on both the top and bottom line as higher TPV, continued execution on the cost reduction front, and ongoing share repurchase activity all contributed to the upside performance,” Tandon wrote in a note.

“While we are encouraged with the improving results, the tough economic environment and continued shift towards driving increased user engagement instead of user growth is pressuring the top-line, in our view,” the analyst stated. “In addition, the mix shift to unbranded lower-margin revenue is reining in margin expansion,” he added.

Check out other analyst stock ratings.

Truist Securities On PayPal Holdings: Analyst Andrew Jeffrey maintained a Buy rating while reducing the price target from $95 to $90.

“According to PayPal, branded vol rose 200bp q/q (+6.5%), but our tracker suggests a more flattish performance based on unbranded/Braintree (BT) commentary,” Jeffrey wrote.

“Regardless, we think PayPal is headed in the right direction as it improves merchant integrations, auth rates and checkout times,” he added.

JMP Securities On PayPal Holdings: Analyst David Scharf reiterated a Market Outperform rating and a price target of $85.

“The company reported 1Q23 results that delivered modest top-line and bottom-line upside, and raised full-year guidance to incorporate the 1Q outperformance and incrementally greater cost initiatives,” Scharf wrote in a note.

“We also heard glimmers of some more positive commentary on e-commerce trends, including in Europe,” the analyst stated. Shares declined in the after-hours session due to concerns around “lower operating margin guidance for 2023 and the modest increase in net new accounts,” he added.

Wedbush On PayPal Holdings: Analyst Moshe Katri maintained an Outperform rating while reducing the price target from $100 to $85.

“PYPL reported better than expected Q1/CY23 results, with most operating and volume metrics exceeding expectations, including e-commerce growth inflecting from the prior quarter's trough levels,” Katri said. “Equally important, transaction growth in (high-margin) branded checkout accelerated from the prior quarter by 200BPTS,” he added.

“Maintaining its conservative tone, citing global macro challenges, the company's guidance suggested moderating revenue growth in Q2/ CY23 (200-300BPTS lower Q-Q),” the analyst further wrote.

PYPL Price Action: Shares of PayPal Holdings had declined by 11.51% to $66.83 at the time of publishing Tuesday.

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