Why Stifel Just Downgraded PayPal: It's All About The Valuation

Stifel’s Scott Devitt downgraded the rating for Paypal Holdings Inc PYPL from Buy to Hold, with a price target of $40. The downgrade is based on valuation, since company’s shares have appreciated and are trading close to the price target.

PayPal’s shares now reflect the company's growth opportunities and strategic execution, and their valuation versus peers “no longer presents the same upside opportunity” as earlier, analyst Scott Devitt said.

One Touch: Strong Early Traction

One Touch has generated significant traction with users and had 18mm enabled accounts as of February, up from 10mm at the end of December. Management noted that the platform yielded an average 150bp increase in conversion for merchants and a 6-14 percent increase in engagement over a period of one to six months.

“With half of shopping experiences starting on mobile devices One Touch should continue to reduce shopping cart abandonment and benefit merchant partners. We are positive on the trends thus far but believe that shares reflect the potential positive impact to TPV growth,” Devitt wrote.

While expressing optimism regarding the growth opportunity for One Touch, the analyst mentioned that the company was making significant attempts at building a global ecosystem across multiple verticals.