Wall Street Grows Cautious on PayPal’s Growth Trajectory

PayPal Holdings, Inc. finds itself under significant scrutiny from the investment community. A cluster of prominent financial institutions have recently revised their outlooks on the digital payments giant, issuing a series of rating downgrades and price target cuts. Trading near $57, the stock is hovering close to its 52-week low, prompting questions about the sudden shift in sentiment among analysts.

The reassessments began in earnest on January 13th, when Daiwa Securities adjusted its stance. The firm downgraded PayPal from "Outperform" to "Neutral" and slashed its price target substantially from $77 to $61. Daiwa's analysts expressed concern over market share erosion, suggesting the stock's valuation would remain subdued until growth in the core branded checkout business reaccelerates.

This move was followed by a chorus of other banks. Compass Point reaffirmed its "Sell" rating on January 15th, setting a $55 price target. Goldman Sachs maintained its own sell recommendation. Meanwhile, Citigroup reduced its target to $60 from $78, and TD Cowen lowered its expectation to $65 from $80.

Key Analyst Adjustments:
- Daiwa Securities: Downgraded to Neutral; $61 target
- Compass Point: Maintained Sell; $55 target
- Goldman Sachs: Maintained Sell; $65 target
- Citigroup: Neutral rating; target cut to $60 from $78
- TD Cowen: Target reduced to $65 from $80

The current analyst consensus now stands at a "Hold" equivalent, with the average price target approximating $77.

Policy Uncertainty Adds Pressure

Further investor unease stems from the political arena. On January 10th, President Trump announced a planned cap on credit card interest rates at 10%, set to take effect January 20th. While banks faced immediate pressure, the implications for fintech firms like PayPal are less clear. Some market observers initially speculated that 'Buy Now, Pay Later' providers might benefit if traditional lenders tighten credit. Despite this, PayPal's stock declined approximately one percent in the session following the news.

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

Valuation Reflects Shifting Perceptions

Trading at a forward price-to-earnings ratio near 10, PayPal is now being valued in line with traditional financial institutions rather than high-growth technology companies. This is despite a fundamentally solid operational profile. The company generates over $32 billion in revenue, delivers a return on equity of 24%, and produced a free cash flow exceeding $6.5 billion for the 2025 fiscal year.

Management has deployed this liquidity aggressively for share repurchases, directing $21.5 billion toward buybacks since 2022. However, this substantial capital return has failed to provide sustained upward momentum for the share price.

The Core Concern: Slowing Growth

The central issue driving analyst pessimism is the performance of PayPal's branded checkout platform. In December, company guidance indicated that growth in the fourth quarter of 2025 would be at least two percentage points slower than in Q3. This deceleration fuels fears that competitors, notably Apple Pay, are gaining ground in the critical mobile payments space.

Kazuya Nishimura, an analyst at Daiwa, acknowledges that PayPal could still achieve annual profit growth of at least 10% through 2027. Nonetheless, the market appears unwilling to assign a premium valuation until tangible evidence of a revenue growth rebound materializes.

Forthcoming Earnings in Focus

All attention now turns to the upcoming quarterly report, scheduled for release on February 2nd or 3rd. Management has provided earnings per share guidance of $1.27 to $1.31 for the fourth quarter and $5.35 to $5.39 for the full 2025 year. This disclosure will be critical in assessing the strength of the holiday shopping period and determining whether the weakness in the core business is persisting.