PayPal shares decline after BoA downgrade

Bank of America analysts have downgraded the rating on PayPal (PYPL) shares from Buy to Neutral, accompanied by a $66 per share price target. This move led to a 1.8% decline in pre-open trading on Wednesday. The analysts view the year 2024 as a transition period for PayPal, as a new CEO and CFO work to earn credibility with investors while driving sustained improvements in top-line metrics, particularly transaction profit growth. They anticipate that achieving these improvements will take time.

In addition, Bank of America analysts express the belief that Street estimates for 2024 are overly optimistic. While PayPal retains a strong brand and balance sheet, the analysts foresee the stock being somewhat rangebound in the near term. They suggest that valuation and sentiment factors may provide downside support.

The analysts at Bank of America also adjusted their rating on Toast (TOST), citing reasons such as slower top-line momentum, increasing competitive intensity, and the results of a recent restaurant point-of-sale (POS) survey.

The downgrade of PayPal reflects the challenges and uncertainties the company might face in the coming year, particularly with new leadership seeking to prove its capabilities and drive positive financial outcomes. The caution regarding 2024 estimates suggests that analysts are adopting a more conservative stance, potentially reflecting concerns about the company’s ability to meet or exceed current market expectations. Investors will likely closely monitor PayPal’s performance and the effectiveness of its strategic initiatives in the evolving fintech landscape.

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