PayPal (NASDAQ:PYPL) stock definitely hasn’t been a winner in 2023. Does this mean it’s time for bargain hunters to start investing in PayPal? Don’t be too eager, as a famous e-commerce platform just dealt PayPal a blow that the payments processor might not recover from.
Don’t assume that 2024 will be better for PayPal stock than 2023 was. Inflation seems to be easing somewhat, but PayPal still has to deal with fierce competition from Apple (NASDAQ:AAPL), Block (NYSE:SQ) and Stripe. With that in mind, let’s see what a couple of Wall Street experts have to say about PayPal’s future prospects.
Cautious Analyst Commentary on PYPL Stock
First, Bank of America analyst Jason Kupferberg expects 2024 to be a transitional year for PayPal. That may be an understatement, as has a new CEO as well as a new chief financial officer (CFO).
It may be a challenging transition for PayPal as the two new executives “seek to earn Street credibility while driving sustained improvements in top-line metrics, especially transaction profit growth, which will likely take time,” Kupferberg warns. Consequently, the Bank of America analyst downgraded PayPal stock from “buy” to “neutral.”
Meanwhile, BMO Capital Markets analyst Rufus Hone issued a “market perform” rating (which is similar to “neutral”) and a $65 price target on PYPL stock. This implies that the stock will only post small to moderate gains over the next 12 months.
Hone only expects PayPal to post mid-single-digit gross profit growth in 2024 and 2025. This helps to explain why the BMO analyst doesn’t expect a moonshot with PayPal stock. I tend to concur, and investors should always remember that just because a stock has been beaten down, this doesn’t mean a rally is “due” or “overdue.”
Bad News for PayPal
In case PayPal didn’t already have enough problems to deal with, here’s another one to add to the list. Reportedly, Amazon (NASDAQ:AMZN) will stop offering PayPal’s Venmo payment processing method during checkout on its e-commerce platform.
Here is Amazon’s official statement, courtesy of Barron’s:
“Starting January 10, 2024, Venmo will no longer be accepted on Amazon.com or the Amazon mobile app. Customers can still use nearly a dozen other payment options, such as debit cards, credit cards, checking accounts, or installments to pay for their orders.”
This is a major blow to PayPal and a win for the company’s competitors. Venmo will be available on Amazon’s checkout through 2023’s holiday season, but after that, Amazon’s customers will have to use other payment methods.
In the opinion of Evercore ISI analyst David Togut, this “news creates concern around PayPal’s ability to monetize on these platforms.” This is a serious concern for PayPal and for the company’s investors. So, stay tuned to find out how PayPal’s top- and bottom-line results may be affected in the coming quarters.
No Need to Put PayPal Stock on Your Shopping List
Even if you’re shopping for stocks during the holiday season, there’s no urgency to invest in PayPal now. The aforementioned analysts’ concerns should make anyone think twice if they’re considering buying PayPal stock.
In other words, prospective investors should find another fintech firm besides PayPal to risk their capital on. For the rest of 2023 and possibly even the first quarter of 2024, it’s wise to simply avoid PYPL stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
