Why PayPal (PYPL) Shares Are Trading Lower Today - PayPal Holdings (NASDAQ:PYPL)

Raymond James analyst John Davis downgraded PayPal Holdings Inc PYPL from Outperform to Market Perform.
PayPal's strong start in 2023 versus the S&P 500 and the analyst's cautious stance over 4Q results led to the re-rating.
While most investors expect initial 2023 revenue growth guidance to come in below the Street, Davis believes the 2023 top-line outlook will imply flat to negative growth for branded checkout, likely resulting in the share loss narrative growing even louder.
Given new disclosures breaking out TPV by segment and specifically branded checkout and Braintree and unbranded, Davis' math suggests branded checkout likely lost share in 2022.
More importantly, the analyst believes an initial 2023 revenue outlook below 7-8% would imply flat to negative growth for branded checkout, given that Braintree and unbranded should account for 400-500 bps of revenue growth, and OVAS should add another 200-300 bps.
Unfortunately, given Salesforce Inc's CRM cyber week data, which suggested Paypal branded checkout lost share (primarily to Apple Inc's AAPL Apple Pay) as processed payments declined 6% Y/Y, the analyst believes the burden of proof has shifted to PYPL and fear the 2023 revenue outlook won't help.
The analyst expects incremental cost cuts from additional layoffs to largely offset top-line weakness and expects the EPS guide to align with the Street.
While the analyst is confident in management's ability to cut costs and likely exceed the prior EPS guide of 15%+ in 2023, the margin trajectory in 2024 and beyond is less clear as cost cuts will be in the rearview mirror and Braintree and unbranded will likely drive the majority of growth.
Although the stock is still relatively inexpensive, Davis moved to the sidelines as he believed significant multiple expansion would prove difficult if branded checkout loses material share.
Price Action: PYPL shares traded lower by 3% at $83.08 on the last check Monday.