Diverging Views Emerge as PayPal Shares Test Lows

PayPal shares have entered the new year under significant pressure, trading near a 52-week low. This weakness coincides with a stark downgrade from investment bank Morgan Stanley, which has introduced fresh downward momentum. Interestingly, this pessimistic outlook is being countered by substantial buying from several major institutional investors, creating a notable market discrepancy.

Contrasting the growing analyst skepticism, a review of third-quarter 2025 filings reveals that several large asset managers significantly increased their stakes in PayPal.

• Merit Financial Group boosted its holdings by 15.5%, building a position valued at approximately $11.06 million.
• Boston Trust Walden established a new position, acquiring shares worth around $4.21 million.
• Cwm LLC expanded its stake by a substantial 31.6%.

These counter-cyclical purchases suggest seasoned investors may view the current valuation—with a price-to-earnings ratio near 11.7—as an attractive entry point. Fundamental performance offers some support for this view: PayPal's third-quarter 2025 earnings per share of $1.34 surpassed the $1.20 consensus estimate, while revenue grew 7.3% to $8.42 billion.

Morgan Stanley's Stark Warning

Adding to the stock's challenges is a radical reassessment from Morgan Stanley. The firm downgraded PayPal to "Underweight" at the start of 2026 and slashed its price target to $51. This projection implies a potential further decline of roughly 12% from current levels.

This bearish stance stands in sharp contrast to the broader analyst consensus. Among the 40 analysts covering the stock, 22 currently maintain a neutral rating, while 14 recommend buying. The average price target sits at $78.29, far above Morgan Stanley's scenario, with individual targets ranging from $51 to $101.

Should investors sell immediately? Or is it worth buying PayPal?

Technical and Options Sentiment Remains Negative

From a chart perspective, the outlook is clearly bearish. The share price is trading well below all key moving averages. The 200-day average at $68.01 now acts as a major resistance level, with the 50-day average at $63.48 also positioned above the current price.

The Relative Strength Index (RSI) reads 34.49, approaching oversold territory. Options market activity reveals a bias toward pessimism, with put options accounting for 30% of total volume. One particularly notable trade involved over 7,000 put contracts with a $50 strike price expiring in February 2026, indicating some traders are positioning for a possible test of the $50 level.

Forecast and Critical Level

For the full 2025 fiscal year, PayPal has guided for earnings per share between $5.35 and $5.39. Fourth-quarter EPS is expected to land between $1.27 and $1.31. The company's quarterly dividend of $0.14 per share translates to an annual yield of approximately 1.0%.

The immediate focus for traders is whether support at the 52-week low of $55.85 will hold. If Morgan Stanley's pessimistic assessment proves correct, a path toward the $51 target could open. Conversely, the institutional buyers are betting on a recovery, viewing the present weakness as a strategic opportunity.