Mizuho Cuts PayPal (PYPL) Rating, Citing Competitive Threat from X

TLDR

• Mizuho downgraded PYPL from Outperform to Neutral, lowering its price target from $60 to $50.
• The firm identified X (formerly Twitter) as a significant competitor, posing a threat to the P2P and digital wallet operations of both PayPal and Venmo.
• Among 45 analysts, the consensus rating is Hold, with an average price target of $56.61.
• PayPal reported Q4 results that fell short of expectations, with EPS at $1.23 (versus the $1.29 estimate) and revenue at $8.68 billion.
• Over the last three months, company insiders have offloaded more than 87,600 shares valued at approximately $3.8 million, amid ongoing securities-fraud litigation.

(SeaPRwire) –   PayPal is facing a challenging period, and a recent move by Mizuho has added to the pressure.

On Thursday, the firm downgraded PYPL from Outperform to Neutral and reduced its price target from $60 to $50. With the stock trading at $49.57 at the time, the new target suggests a marginal upside of only 0.87%.

PayPal Holdings, Inc., PYPL

Mizuho’s primary concern centers on competition. Specifically, the firm highlighted Elon Musk’s social media platform, X, as a direct rival to PayPal and Venmo within the digital wallet and peer-to-peer payment sectors.

“We believe PayPal/Venmo face the most direct substitution risk as X targets the same P2P and wallet entry points,” Mizuho stated. The firm also noted potential long-term headwinds for PayPal’s branded checkout services due to the rise of native social commerce.

As part of the downgrade, Mizuho also lowered its growth projections for both Venmo and PayPal’s branded checkout offerings.

A Crowded Hold

Mizuho’s cautious stance is shared by many. Of the 45 analysts tracking PYPL, 32 maintain a Hold rating, seven suggest a Buy, and six recommend a Sell. The average price target is $56.61.

Other recent analyst reports reflect similar sentiment. Loop Capital initiated coverage with a Hold rating and a $46 target, citing concerns over market share erosion. BofA Securities also initiated with a Neutral rating and a $48 target, while Evercore reduced its target from $65 to $40 in February.

Wells Fargo lowered its target from $67 to $48, and BNP Paribas adjusted its target slightly from $41 to $43.50, maintaining a Neutral rating.

Investor sentiment was further dampened by PayPal’s latest earnings report. The company missed consensus estimates for Q4, reporting EPS of $1.23 against the expected $1.29. Revenue reached $8.68 billion, missing the $8.82 billion forecast, despite representing a 4% year-over-year increase.

Insider Selling and Legal Pressure

Regarding insider activity, Chief Accounting Officer Chris Natali sold 2,208 shares at $44.73 on March 3rd, reducing his holdings by nearly 66%. On the same day, insider Suzan Kereere sold 13,515 shares at $46.02, cutting her stake by 30%.

In total, insiders have divested more than 87,600 shares, worth roughly $3.8 million, over the past three months.

Additionally, the company is facing several securities-fraud class action lawsuits, with various law firms aiming for an April 20 deadline for lead-plaintiff applications. Some of these filings allege potential personal liability for top executives.

On a brighter note, PayPal recently integrated its Payment Links feature into Canva, providing access to that platform’s 265 million monthly users. Furthermore, PayPal has appointed Alyssa Henry, the former CEO of Square, to its board of directors.

There have also been unverified reports suggesting that Stripe is in preliminary discussions to acquire all or parts of PayPal, though neither company has issued a comment.

PYPL’s 12-month trading range is between $38.46 and $79.50, with the stock currently hovering around $49.57.