PayPal Stock (NASDAQ:PYPL)
PayPal Stock (NASDAQ:PYPL) fell by 10% in premarket trading on Tuesday after the payment technology firm lowered its operating margin projection for 2023 to at least 100 basis points from its prior expectation of 125 bps.
On Monday, during the results call for the firm, management said that the operating margin increase in the second half of 2023 would be less than what it will be in the first half. As a result of reaching the halfway point of its cost-cutting program, the company’s operational expenditure drop will slow down during the third and fourth quarters of the year, compared to the first two quarters.
Even though the company’s results for the first quarter revealed at least consistent trends in branded checkout growth, analyst Timothy Chiodo of Credit Suisse downgraded PayPal to Neutral from Outperform.
He mentions certain things that affected growth in Q1 and will continue to do so in the short future, such as the weakening of invoicing, the closure of PayPal unbranded, and the cessation of PayPal Here.
In a note to clients, the analyst explained, “We find it challenging to recommend the shares at this time given the prospects for continued transaction margin pressures throughout 2023 (partly mix driven), PayPal’s vertical skew (discretionary) in an uncertain macro backdrop, pending management transition, and increasing competitive pressures (the longer term).”
If Chiodo believes there is “potential for a resumption of more meaningful total company gross profit growth in 2024 and beyond,” he may adopt a more optimistic stance about the shares.
His rating of Neutral is in line with the SA Quant rating of Hold; nevertheless, this stands in contrast to the average rating given by SA authors and the average rating given by Wall Street, both of which are Buy ratings.
Featured Image: Unsplash @ Marques Thomas
Author Shariq Khan 
