PayPal Holdings' push into the small- and medium-size business market will take "years" to improve profitability, says an Oppenheimer analyst who on Thursday downgraded PYPL stock. In another development for digital payment stocks, Square parent Block is off to a rough start in 2024.
Under new Chief Executive Alex Chriss, PayPal aims to expand "PayPal Complete Payments" services in the SMB market. Oppenheimer analyst Dominick Gabriele downgraded PYPL stock to perform from outperform.
"With profitability falling as branded-to-unbranded volume mix shift continues, we don't think PYPL's price to earnings multiple will expand meaningfully near-term," Gabriele said in a report. "PPCP takes years to meaningfully affect PYPL's profitability trajectory as an offset to growing unbranded (transaction) volume mix."
PYPL Stock: New CEO
Chriss took the helm in late September.
On the stock market today, PayPal traded flat at 58.66, while SQ stock rose fractionally to 68.79.
In early 2024, PYPL stock has retreated nearly 5%. PayPal stock fell 14% in 2023. But shares had clawed back above the 50-day moving average and near the 200-day line late in the year.
San Jose, Calif.-based PayPal has evolved from an online checkout site to a mobile shopping and person-to-person payments site.
"We are incrementally positive on payment stocks but move to the sidelines on PYPL," said Gabriele.
SQ Stock: Bitkey Wallet Rolled Out
After a late 2023 rally, SQ stock has declined 11% in 2024. Square stock advanced 23% last year.
Square on Tuesday said its bitcoin digital wallet is now available for Cash App users in 95 countries.
"The product and platform aims to democratize and simplify access to self-custody solutions for crypto assets, allowing users to own and manage their bitcoin easily and securely, without relying on online custodians and hot wallets that can be compromised by bad actors," Macquarie analyst Paul Golding said in a report.
He added: "We think, if marketed broadly, the Bitkey platform could drive greater use of Cash App generally, but especially for crypto users."
Aside from bitcoin products, the Afterpay acquisition remains an issue for Square stock.
SQ stock holds a Relative Strength Rating of 88 out of a best-possible 99. But Square stock failed to form an actionable base in late 2023 during its rally.
If the U.S. economy avoids a recession in 2024, some analysts say the outlook will improve for PYPL stock and other fintech stocks.
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