PayPal Shares Face Mounting Headwinds as Core Business Cools

The outlook for PayPal is becoming increasingly clouded by competitive threats and a deceleration in its primary operations. A recent wave of cautious analyst commentary has reinforced the stock’s weak trajectory, with concerns pinpointing a specific vulnerability in the company’s business model rather than broader market conditions.

Market Sentiment Sours as Analysts Downgrade

Several prominent research firms have recently tempered their outlook on PayPal’s equity, citing worries over market share erosion and moderating growth in key business areas.

• Daiwa Securities downgraded the stock from “Outperform” to “Neutral,” slashing its price target substantially from $77 to $61. The firm’s analysts pointed to persistent pressure on both valuation and growth metrics.
• Following suit, Monness, Crespi, Hardt reduced its rating from “Buy” to “Neutral,” referencing dampened earnings expectations.
• While maintaining a “Hold” recommendation, Jefferies also sees limited upside, setting a $60 price target. The firm highlighted weakening e-commerce sales in Germany—a critical market for payment volume—as a particular burden.
• Bank of America reiterated its “Neutral” stance with a $68 target.

This pessimistic shift has kept the stock under pressure. Shares closed at $56.56 yesterday, a level that stands approximately one-third below the 52-week high of $89.31 reached in early 2025.

The “Branded Checkout” Conundrum

Analyst scrutiny is zeroing in on PayPal’s “Branded Checkout”—the familiar, logo-adorned payment portal that processes a majority of its transactions. Growth in this segment has notably softened.

Daiwa emphasized that the stock’s valuation is likely to remain constrained until growth in Branded Checkout’s Total Payment Volume (TPV) reaccelerates clearly. Since September 2025, a more challenging macroeconomic backdrop has added to the strain, as weaker overall consumer spending directly impacts payment volumes.

The company itself contributed to the cautious mood in December, indicating in an update that growth for the fourth quarter of fiscal 2025 would likely be at least two percentage points below the pace set in the third quarter. This guidance has bolstered analyst skepticism.

Strategic Pivots Amid the Challenges

Despite the downward trend, PayPal is actively pursuing new growth initiatives aimed at better monetizing its vast customer base.

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

1. AI and “Agentic Commerce”
In partnership with Microsoft, PayPal is expanding its role in AI-driven e-commerce. The “Copilot Checkout” feature is designed to let users make purchases directly within the Copilot environment. This integration seeks to embed PayPal early within emerging digital ecosystems.

2. Enhanced Data Analytics for Merchants
At CES 2026, the company unveiled “Transaction Graph Insights” and a “Measurement Partnership Program.” These tools are intended to provide merchants with detailed analytics on customer purchasing behavior, creating value beyond mere payment processing.

3. PayPal World
Set to launch later this year, “PayPal World” aims to create tighter linkages between international wallets and payment systems. Bank of America estimates this project could generate approximately $365 million in additional revenue if successfully implemented.

4. Pursuit of a Banking License
Late in 2025, PayPal submitted applications to establish “PayPal Bank,” a Utah-licensed Industrial Loan Company. This move would enable the company to originate loans and hold deposits directly, marking a step toward becoming a more integrated financial services provider.

Investment Perspective: A Test of Patience

The current operational and market picture remains mixed. The stock is trading only about 12% above its 52-week low, while a Relative Strength Index (RSI) reading just above 70 suggests a short-term recovery may already be overextended. Concurrently, the company’s ventures into AI, data analytics, global networks, and banking point to potential future revenue streams.

In the near term, however, the narrative is dominated by weakness in Branded Checkout, slowing payment volume, and cautious analyst sentiment. A sustained relief from valuation pressure will likely require a clear reacceleration of growth and profitability in the core business, coupled with measurable contributions from PayPal’s newer strategic initiatives.