Given the recent sell-off, PayPal (NASDAQ:PYPL) stock has witnessed a massive erosion in its value, dropping more than 65% in the past six months. Meanwhile, it has fallen about 49% this year alone and is trading below the $100 mark.
A confluence of factors including the pandemic, muted e-commerce growth, supply-chain headwinds, and a tight labor market took a toll on its performance and, in turn, its stock price. Also, eBay’s (NASDAQ:EBAY) payment migration remained a drag.
Despite the recent plunge in its price, Bank of America Securities analyst Jason Kupferberg doesn’t expect PYPL stock to recover anytime soon and sees it trading sideways in the near term.
Kupferberg sees 2022 as a transition year for PYPL and downgraded the stock to a Hold from a Buy. The analyst stated that PayPal’s focus shift to driving user engagement from growing the size of the user base could face complications from the Russia/Ukraine conflict. Moreover, the analyst reduced the price target to $107 from $175.
Notably, during the Q4 conference call, PayPal’s CFO, John Rainey, stated that the company is “pivoting towards a higher ROI, or return on investment initiative, which is really around trying to retain high-quality users.”
In response, Jefferies analyst Trevor Williams stated that PayPal now expects to add 15-20 million net new active accounts in 2022, which is considerably lower than Street’s projection of 53 million.
He added that PayPal’s growth excluding eBay “remains healthy.” However, the company’s FY22 outlook is pressured by “weaker spending from lower-income customers supply chain constraints, and fewer Net New Actives.”
Williams has a Hold rating on PayPal stock. He expects PayPal to benefit from increased e-commerce and digital wallet penetration. However, the analyst sees “limited potential for multiple expansion.”
Wall Street’s Take
Overall, Wall Street remains cautiously optimistic on PYPL stock. Its Moderate Buy consensus rating is based on 26 Buy, 10 Hold, and 1 Sell recommendations. However, due to the massive erosion in its stock price, its price forecast on TipRanks shows solid upside. The average PayPal price target of $182.36 implies 88.3 % upside potential to current levels.
Conclusion
PayPal stock faces multiple headwinds in the near term. However, its strong competitive positioning in digital payments, opportunities in the BNPL (buy now pay later) segment, the deal with Amazon (NASDAQ:AMZN), expansion of its merchant network, and new product launches bode well for growth.
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