PayPal Holdings Inc Views Braintree Will Hurt Profit Margins

PayPal Holdings Inc

One Wall Street analyst believes that a more significant portion of PayPal Holdings Inc (NASDAQ:PYPL) growth will come from the company’s Braintree arm, which includes the Venmo payment service. However, the difficulty for PayPal stock is the unit’s low-profit margins. 

Analyst Recommendation on PayPal Holdings Inc Shares

Tuesday marked when Susquehanna analyst James Friedman changed his recommendation for PYPL shares from buy to neutral. 

Friedman stated to clients in a report that “Braintree is swiftly gaining share within PYPL’s overall payment volume producing negative leverage from a mix.” 

He added: “As a result of the fact that Braintree is expected to continue being the primary force behind PYPL as a whole, the unit economics of Braintree could drag on the aggregated performance of PYPL. The consensus may be underestimating the pressure that PYPL may encounter on its yield and transaction expense. As a result of ‘negative leverage’ mix shift poses and the fact that the stock has gained 36% from its lows, we are changing to a neutral position.” 

Today’s trading on the stock market saw a decline of 3.6% for PayPal Holdings Inc (NASDAQ:PYPL) stock, bringing the price to 91.63. 

The stock of PayPal fell by more than 50 percent. 

After a setback on Tuesday, the company’s share price dropped by more than 52 percent in 2022. However, after hitting a low of 67.58 on July 1, PayPal stock has made a strong comeback. 

On the other hand, share prices have decreased since reaching an all-time high of 310.16 on July 26, 2021. 

According to the IBD Stock Check-up results, the relative strength rating for PayPal stock is 33 out of a maximum potential 99 points. 

In addition, San Jose, California-based firm In 2013, PayPal Holdings Inc (NASDAQ:PYPL) completed the acquisition of mobile payment provider Braintree. Venmo, a peer-to-peer payment service offered by Braintree, enables individuals to send money to their loved ones or close friends. It is in direct competition with the Cash app provided by Square’s parent company, Block. 

During the pandemic, the surge in online shopping led to a rise in the value of PayPal shares. Despite this, growth in online business has returned to levels seen before the pandemic. 

In August, the company announced that the hedge fund Elliott Management had purchased a holding in a stock valued at two billion dollars in PayPal Holdings Inc (NASDAQ:PYPL).


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About the author: Valerie Ablang is a freelance writer with a background in scientific research and an interest in stock market analysis. She previously worked as an article writer for various industrial niches. Aside from being a writer, she is also a professional chemist, wife, and mother to her son. She loves to spend her free time watching movies and learning creative design.