PayPal Stock Cut to Sell at Goldman Sachs. Why Its Tough Year Is Getting Even Rougher.

PayPal stock caught a downgrade from Goldman Sachs. (David Paul Morris/Bloomberg)

Key Points

• Goldman Sachs downgraded PayPal to Sell from Neutral, citing tough comparisons and concerns about inflation and the job market.
• PayPal shares were down 1.7% to $68.61, while analyst Will Nance set a price target of $70.
• Despite a 20% stock decline this year, Wall Street analysts predict steady earnings growth of nearly 11% next year.

PayPal has had a rough year. The stock is down nearly 20%. And on Monday, Goldman Sachs made clear that it doesn’t think things are going to get better anytime soon for the fintech.

Goldman analyst Will Nance cut his rating to Sell from Neutral, citing tougher comparisons to last year’s fourth-quarter strong results as well as concerns about the impact of sticky inflation and the weakening job market on less-affluent customers.

In afternoon trading, shares were down 1.4%—to $68.85—even though the three major market indexes and the financial services sector were rebounding from Friday’s tariff-induced selloff.

PayPal, the owner of Venmo, has struggled this year in what has been a mixed bag for fintech stocks. For example, rival Block has tumbled 11%, but buy-now-pay-later leader Affirm and online lender SoFi ,have soared.

Nance has a price target of $70 on PayPal, which is slightly above where the stock is trading now. But he expects an average 12-month gain of nearly 15% for the other stocks he covers.

And while Nance acknowledges PayPal is fairly cheap—today’s trading price is 12 times Wall Street’s 2026 consensus earnings estimates—that doesn’t mean the stock has bottomed.

The company didn’t immediately respond to a Barron’s request for comment about Nance’s report.

PayPal stock has been relatively cheap for some time now, and Nance thinks the current multiple isn’t a floor.

“Shares can continue to de-rate as investors question the longer term competitive moat around the business,” he wrote

More interest-rate cuts by the Federal Reserve, which instituted a quarter-point reduction in September, would be a problem for PayPal, too. Lower rates would lead to reduced profit margins.

Also not helping PayPal, according to Nance, is all the competition it faces. Besides traditional rivals, for example, tech titans Apple and Google owner Alphabet offer digital wallets for their mobile customers.

Other Wall Street analysts are divided on where PayPal goes next. Of the 44 analysts covering PayPal, 20 rate it Buy, 20 rate it Hold, and four rate it Sell, according to FactSet.

The consensus price target of just under $82 is about 17% higher than its current level and the range of forecasts is wide. The lowest is $62 and the highest is $120.

Wall Street is still predicting steady earnings growth of nearly 11% next year and just under 10% a year for the next few years.

So the stock could be close to bottoming. When it starts to climb again, though, is another question.

Write to Paul R. La Monica at paul.lamonica@barrons.com