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Raymond James downgraded shares of PayPal (NASDAQ:PYPL) to Market Perform from Outperform and removed a $107 per share price target.
The analysts made a move on PYPL after shares gained about 20% year-to-date, outperforming the S&P 500 (+8% YTD). Moreover, they are cautious on PayPal ahead of this week’s earnings report. Street expects PayPal to report Q4 EPS of $1.20 on revenue of $7.39 billion.
“While most investors expect initial 2023 revenue growth guidance to come in below the Street (buyside 5-7% vs Street +9%, RJe +7%), we believe the 2023 top line outlook will imply flat to negative growth for branded checkout (vs e-com MSD+) which will likely result in the share loss narrative growing even louder,” Raymond James analysts wrote in a note to clients.
They are also not so optimistic about the margin trajectory in 2024 and beyond despite the belief that PayPal will be able to cut costs and exceed its EPS guide of 15%+ in 2023.
“Despite the fact the stock is still relatively inexpensive (16x 2024E non-GAAP EPS, 14x FCF), we are moving to the sidelines as we believe meaningful multiple expansion will prove difficult if branded checkout is in fact losing material share,” the analysts concluded.
PayPal stock trades almost 2% lower in premarket Monday.
