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Why PayPal Stock Dropped Today

By Evan Niu, CFA - Updated Jan 27, 2021 at 2:49PM

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The online payments specialist got some bullish notes from Wall Street, but they weren't enough to spare the stock from getting caught up a broad market sell-off.

What happened

Shares of PayPal (PYPL 5.24%) dropped by as much as 7% Wednesday despite bullish sentiment from Wall Street. The market is selling off aggressively, and the tech sector is faring worse than others. As of 3:46 p.m. EST, the stock was down by 4.8%, while the S&P 500 was off by 2.8%.

So what

Three Wall Street firms put out research notes on PayPal Wednesday morning:

  • Bernstein: Reinitiated coverage with an outperform rating and a price target of $297.
  • KeyBanc: Maintained its overweight rating and increased its price target from $235 to $300.
  • Morgan Stanley: Kept its overweight rating and boosted its price target from $229 to $297.

Those targets all represent considerable upsides from Tuesday's closing share price of $241.

Person using PayPal's app on a smartphone

Image source: PayPal.

Now what

Bernstein analyst Harshita Rawat argued that PayPal is under-monetized within the fintech sector, but has ample opportunities ahead as the leading digital wallet. The accelerating shift to online buying will help PayPal expand the use cases for its app and platform, although Rawat cautioned that expectations for the near-term may need to be reset.

KeyBanc analyst Josh Beck pointed to "encouraging" metrics from the firm's proprietary Key First Look Data program that show e-commerce and digital transformations accelerating.

Morgan Stanley analyst James Faucette cited rising acceptance of PayPal at the top 500 online retailers in the U.S., while its merchant attrition remains very low. "This acceptance lead and position as a preferred digital wallet option for non-Amazon merchants reinforces our long-term thesis that PayPal can grow its TPV [total payment volume] at or above the rate of eCommerce [excluding Amazon]," the analyst wrote  in a research note to investors.

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Stocks Mentioned

PayPal Holdings, Inc. Stock Quote
PayPal Holdings, Inc.
PYPL
$77.68 (5.24%) $3.87
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$116.46 (3.58%) $4.02

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