Analyst Downgrades PayPal (PYPL) to Neutral on Margin Pressures

Susquehanna analyst James Friedman moved to the sidelines on PayPal (NASDAQ: PYPL) shares as he sees margins being negatively impacted by Braintree’s increasing share within PayPal’s Total Payment Value (TPV).

This “negative leverage” also prompted Friedman to cut the price target to $100 from $115 per share.

“Piecing together intermittent disclosures, we estimate that Braintree accounted for 31% of PYPL's TPV in 2021 and may reach 44% by 2023E, contributing roughly 72% of PYPL's overall volume growth next year. As Braintree is likely to continue driving PYPL as a whole, its unit economics may drag on PYPL consolidated results,” Friedman warned investors in a client note.

The analyst also claims that the market is underestimating these impacts on PYPL while valuation is also not helping as PYPL shares trade over 35% off the lows.

Moreover, the analyst is also concerned by the fact that FedEx withdrew its guidance recently.

“Given PYPL's high international exposure we note potential for weakness in shopper trends and PYPL's TPV,” Friedman concluded.

By Senad Karaahmetovic

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