PayPal, the global leader in digital payments, has recently garnered positive momentum after nearly three years of underperformance, according to a recent analysis by Bernstein. Analyst Harshita Rawat has upgraded the company’s shares to outperform, marking a significant turnaround from a previous downgrade to market perform back in 2021. This shift in sentiment comes as a breath of fresh air for investors who had witnessed a steep decline in PayPal’s stock price over the past few years.
The concerns cited by Bernstein in their previous downgrade have materialized, leading to a substantial loss in PayPal shares’ value since late July 2021. Factors such as rising competition, structural changes in the e-commerce sector, and weak execution had weighed on the company’s gross profit. However, Rawat now sees a silver lining with improving gross profit trends and strong product momentum under the new management.
In a note issued on Wednesday, Rawat highlighted PayPal’s strategic optionality in the ecommerce and digital commerce space, along with an attractive valuation at current levels. While acknowledging potential macro headwinds that could impact the stock, she expressed confidence in the company’s ability to deliver consistent beats and raises in the coming quarter.
Despite a modest gain of 8.3% in 2024, PayPal’s performance lags behind the broader market, with the S&P 500 posting a 15.9% increase. Over the past 12 months, the stock has seen a decline of more than 12%. However, Rawat’s optimism and the recent upgrade signal a potential turning point for PayPal, hinting at brighter days ahead for the digital payments giant.
Industry experts believe that PayPal’s resurgence could have far-reaching implications for the fintech sector and consumers alike. The company’s renewed focus on innovation and customer-centric solutions could drive growth and enhance its competitive position in the market.
As PayPal charts a new course towards recovery, investors will be closely watching for any signs of sustained improvement and the company’s ability to capitalize on emerging trends in the digital payments landscape. With the potential for steady beats and raises on the horizon, PayPal’s journey towards regaining its former glory seems to be back on track.
