PayPal Stock Downgraded to Neutral, Price Target Set at 62 By

On Tuesday, Daiwa Securities adjusted its position in PayPal (NASDAQ:) Holdings Inc. (NASDAQ:PYPL), upgrading the rating to Neutral from Outperform and changing the price target to $62 from $64 previously. The revision reflects a new valuation based on updated earnings per share (EPS) estimates, taking into account stock-based compensation expenses beginning in the first quarter of fiscal 2024.

The analyst cited PayPal's conservative guidance for fiscal 2024 as the reason for reducing the consensus estimate. Although it acknowledges that the shares appear undervalued when considering valuation metrics, the company considers it difficult to predict medium to long-term EPS growth. The company believes it will be difficult to identify a clear growth trajectory for trading margin dollars and see the benefits of increased investments until they begin to have a material impact on earnings.

Daiwa Securities highlighted that 2024 is expected to be a pivotal year for PayPal, which will focus on executing its strategic plan. However, the company expects it will take time for service improvements to translate into earnings growth, making it difficult to assess medium-term EPS growth potential. As a result, the investment rating has been downgraded to Neutral.

The company is waiting for clear signs of growth and successful implementation of PayPal's investments before reconsidering its investment rating. The analyst pointed out that once there is a return to a clear growth trajectory for transaction margin dollars and the benefits of accelerated investments are evident, PayPal could potentially experience strong earnings growth. Daiwa Securities intends to closely monitor the company's performance, awaiting the appropriate moment to possibly revise its investment opinion.

InvestingPro Insights

As investors digest Daiwa Securities' recent rating adjustment for PayPal Holdings Inc . (NASDAQ:PYPL), it is essential to consider the company's broader financial landscape. InvestingPro data indicates a market capitalization of $64.4 billion, reflecting the company's significant presence in the financial sector. Despite analyst caution, PayPal's price-to-earnings (P/E) ratio sits at a competitive 15.58, suggesting the stock is potentially undervalued relative to short-term earnings growth. term – a tip from InvestingPro that might be of interest to value investors.

Additionally, PayPal's revenue growth over the last twelve months (Q4 2023) was positive at 8.19%, indicating a steady increase in the company's financial performance. The company's gross profit margin during the same period was 39.59%, which shows its ability to maintain profitability. This data highlights the strength of PayPal's financial foundation, which could reassure investors about the company's ability to effectively execute its strategic plan.

InvestingPro tips point out that management's aggressive share buybacks and forecast of profitability for this year could be a sign of confidence in the company's future. Furthermore, with 21 analysts revising their earnings downward, it is clear that market sentiment is mixed. For those interested in digging deeper into PayPal's financials and future prospects, InvestingPro Insights offers additional analysis and insights. Use coupon code PRONEWS24 to get an additional 10% off a Pro and Pro+ annual or bi-annual subscription, and explore InvestingPro's 7 tips available for PayPal at

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