PayPal Shares Tank After Q3 Results, Analysts Say Management Is 'Executing Well' On Re-Alignment Initiatives

Shares of PayPal Holdings Inc PYPL dropped in price on Wednesday after the company reported downbeat third-quarter revenues.

The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.

• Canaccord Genuity analyst Joseph Vafi maintained a Buy rating, while raising the price target from $80 to $96.
• Goldman Sachs analyst Will Nance reiterated a Neutral rating, while lifting the price target from $79 to $87.
• BMO Capital Markets analyst Rufus Hone reaffirmed a Market Perform rating, while raising the price target from $73 to $82.
• RBC Capital Markets analyst Daniel Perlin maintained an Outperform rating, while raising the price target from $84 to $89.
• Morgan Stanley analyst James Faucette reiterated an Equal-Weight rating, while raising the price target from $71 to $76.
• Needham analyst Mayank Tandon reaffirmed a Hold rating on the stock.
• KeyBanc analyst Alex Markgraff maintained a Sector Weight rating on the stock.

Check out other analyst stock ratings.

Canaccord Genuity: "Q3 marked another solid quarter of progress in PayPal's business realignment with new CEO Alex Chriss at the helm now for about a year," Vafi wrote in a note. While margins at Braintree improved, this is coming with some contracts being negotiated down in overall volumes, which is a headwind to the top line, he added.

Management is focusing on finetuning PayPal's entire product portfolio, "including a new strategy for pricing unbranded checkout, a more streamlined branded checkout experience, expanding TAM beyond ecommerce, and more monetization for Venmo," the analyst stated. These initiatives could generate "profitable payment volume moving forward," he further wrote.

Goldman Sachs: PayPal's third-quarter results were broadly in-line with investor expectations, against "a higher bar than in prior quarters," Nance said. While there were concerns around commentary for 2025 transaction margins, this seems "a bit overly negative," he added.

The company's new management team is trying to set achievable guidance, rather than setting the stage for a steep deceleration, the analyst stated. "PYPL will likely sustain low teens EPS growth with a strong capital return component and a net cash balance sheet, and mgmt is executing well against numerous self-help initiatives," he further wrote.

BMO Capital Markets: PayPal continues to revamp the branded checkout experience, across both desktop and mobile, and improve conversion rates, Hone said. While Braintree "again contributed meaningfully," the company expects the "ongoing price-to-value efforts" to dampen the segment's volumes and revenues in the fourth quarter and 2025, "before accelerating thereafter," he added.

"PYPL’s initial 2025 guidance implies underlying momentum in the business; however, we want to see evidence that Branded Checkout TM$ growth can accelerate meaningfully before getting more constructive," the analyst further stated.

RBC Capital Markets: Adjusted earnings came in at $1.20 per share, beating consensus of $1.07 per share, Perlin said in a note. Total payment volume rose 9% year-on-year to $423 billion, also surpassing expectations of $421 billion, he added.

 "4Q24 guidance is for revenue growth in the low-single digits, which implies ~$8.2B of revenue, which management called out was a direct result of Braintree's merchant negotiations and ongoing efforts to drive profitable growth," the analyst wrote. Management also projected earnings to decline in the low- to mid-single digits, he further stated.

Morgan Stanley: The stock tanked on management guidance that calls for core transaction margin dollar growth of around 4% in 2025, Faucette said.

"Expect meaningful acceleration in Branded and Venmo, along with Fastlane contribution, will take time to realize and is largely priced in at current valuation," the analyst wrote.

Needham: PayPal's revenues rose 5.8% year-on-year to $7.85 billion, missing consensus of $7.88 billion, while its total payment volume surged 9% to $422.6 billion, beating the Street's $422.5 billion expectation, Tandon said. The company ended the quarter with 432 million active accounts, up both sequentially and year-on-year, due to both merchant and consumer account growth, he added.

Management issued a mixed guidance for the fourth quarter but raised full-year projections, which calls for an acceleration in earnings growth, the analyst stated. The softer-than-expected guidance for the fourth quarter assumes "ongoing revenue headwinds as the company renegotiates Braintree merchant agreements to drive LT profitable growth," he further wrote.

KeyBanc Capital Markets: PayPal's results were "generally good," with important parameters being in-line with or better than expected, Markgraff said.

"The positive results were tempered by commentary surrounding the product ramp (branded, Fastlane in particular) and an initial model framework for 2025, in our view," the analyst wrote. While PayPal is making progress in platform transformation, there needs to be "an indication of success against important product initiatives" to turn positive on the stock, he added.

Price Action: Shares of PayPal had declined by 1.53% to $79.05 at the time of publication on Wednesday.

Read More:

• PayPal’s Solid Transaction Growth Boosts Confidence, Yet Q4 Revenue Guidance Dampens Enthusiasm: Analyst

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