Incoming PayPal Holdings Chief Executive Alex Chriss faces a tough turnaround job, says an analyst who downgraded PYPL stock on Monday.
Chriss, formerly president and general manager of Intuit's small business and self-employed group, will take over as PayPal CEO on Sept. 27.
SVB MoffettNathanson analyst Lisa Ellis downgraded PYPL stock to market perform. Apple's push into digital payments continues to pressure PayPal, Ellis said in a report. There's also growing competition with Square parent Block, she said.
"Looking forward, unfortunately, we expect PayPal's gross profit growth to remain lackluster, in the low- to mid-single digits," Ellis said. "We see the potential for further downside to our estimates, particularly given the strong momentum of Apple Pay, which we worry will begin to benefit from the powerful network effects in payments."
On the stock market today, PYPL stock fell 2% to close at 62.94. PayPal stock has dropped 12% in 2023.
PYPL Stock: Venmo Upside Limited?
"In addition to the competitive pressure on PayPal-branded checkout, and the uncertain impact of the aggressive Braintree pricing strategy, new PayPal CEO Chriss has a few other challenges to contend with," Ellis said.
"The recent deceleration in Venmo's growth, likely due to competitive pressure from Block's Cash App. Venmo is not currently a significant revenue contributor for PayPal but has long been viewed as a source of long-term upside."
Chriss replaces Dan Schulman will continue to serve on the PayPal board of directors through May 2024 after he exits as CEO.
San Jose, Calif.-based PayPal has evolved from an online checkout service to a mobile shopping and person-to-person payments service.
PayPal ranks No. 17 out of 38 stocks in IBD's Finance-Credit Card and Payment Processing industry group, according to IBD Stock Checkup. PYPL stock has an IBD Composite Rating of 57 out of 99.
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