What happened

Shares of PayPal Holdings (PYPL 0.68%) were trading up 4.9% as of 12:49 p.m. ET on Wednesday. The move comes after Bank of America (BofA) downgraded the stock from a buy to hold. 

However, a lift in broader market sentiment is winning out today. At the time of writing, the S&P 500 index was also up 2.8% as investors digest the latest developments in Ukraine and possibly seek out bargains on the dip.

So what

Analyst Jason Kupferberg with BofA cited reasons that don't hinge on PayPal's long-term competitive position but instead are based on short-term headwinds. The analyst sees PayPal entering a "transition year" that could weigh on the stock price.

Specifically, the analyst sees management's pivot to driving higher revenue-per-user (instead of new customer growth) becoming more complicated given the problems in Ukraine. Nearly a third of PayPal's revenue was earned in Europe in 2021, according to the analyst. This clouds the near-term outlook for growth and therefore doesn't give investors any clear catalysts for when revenue might accelerate again.

An investor checking a stock on a smartphone.

Image source: Getty Images.

Now what

PayPal's guidance calls for revenue to increase between 15% to 17% in 2022, which includes a four-point reduction from the loss of eBay. Adjusted earnings per share are expected to be flat to up to 3% over 2021. Earnings will include a 12-point headwind stemming from reserve releases and taxes. 

The loss of eBay's payment volume has been a concern for investors over the last few years. eBay recently transitioned to its own payments system faster than PayPal expected. The payments leader disclosed that the loss of eBay's business in 2021 reduced its top-line growth by a whopping 11 percentage points. Excluding eBay, PayPal's revenue would have grown 29%.

But remember, the stock has already fallen 56% over the last year, so a lot of these concerns may be priced in for the most part. At a forward price-to-earnings (P/E) ratio of 21, long-term-focused investors could have a great value on their hands to ride the long-term growth of digital payments.