Morgan Stanley advises selling PayPal. This is the third downgrade in a month
Payment giant PayPal Holdings received its third downgrade from analysts this month: on December 16, Morgan Stanley (MS) downgraded its recommendation on the company's shares from "neutral" to "sell," SeekingAlpha writes.
MS analyst James Fawcett said his concerns stem from the slow progress in improving PayPal's proprietary checkout solutions. These changes are proving to be more complex and time-consuming than expected, he said. In addition, they still aren't resulting in the growth in usage of the service that analysts had hoped for, SeekingAlpha points out.
Bank of America Securities also agreed with this assessment. It also downgraded PayPal amid delays in restoring growth of the company's proprietary checkout service - the company's tool for online payment and checkout on partner websites and apps.
In early December, the recommendation on PayPal shares was also worsened by JPMorgan (from "buy" to "neutral").
Why analysts don't believe in PayPal
The additional challenges PayPal may face by 2026 stem from two key factors.
- First, the company has been slow to monetize its popular Venmo payment app, SeekingAlpha writes.
- Second, PayPal faces the risk of the rise of so-called agentic commerce, a model in which automated AI agents make purchases and payments on behalf of users, which could weaken the role of traditional payment intermediaries and create a negative investment narrative around the company's business, Fawcett said.
He added that amid the company's slow growth, experts "see an increased risk of downward revisions to adjusted earnings per share forecasts." "In addition," the analyst noted, "we expect that PayPal will have to continue to invest in addressing these issues and increase marketing spending to slow the loss of market share," Morgan Stanley said in a research note, as quoted by SeekingAlpha.
PayPal shares lost nearly 2% in trading on Dec. 18.
Morgan Stanley's Underweight rating contrasts with the average consensus rating of Wall Street analysts, which is Neutral. Whereas the average analyst rating for Seeking Alpha is Buy.
Of the 46 analysts who monitor PayPal securities, 26 advise holding them in a portfolio, 16 advise buying and four advise selling, MarketWatch data show.
This article was AI-translated and verified by a human editor
