Bank of America on Thursday downgraded PayPal Holdings Inc (NASDAQ:PYPL, XETRA:2PP) to “Neutral,” warning that the company’s effort to revive growth in its core branded checkout business is taking longer than expected and that 2026 is shaping up to be an investment-heavy year.
Analysts said the firm is stepping to the sidelines until there is clearer evidence that PayPal’s turnaround is gaining traction.
“PYPL’s effort to reinvigorate growth in its core branded checkout is taking longer than expected and limits near-term upside,” Bank of America wrote, adding that the risk-reward looks “balanced” in the absence of more visibility.
Analysts cut their price objective on the stock to $68 from $93.
The brokerage said PayPal is one of the only companies in its coverage pointing to macro pressures during the holiday season, with the company flagging softness in both October and November. “This was surprising to us as holiday spending updates from retailers have been generally constructive,” they wrote.
PayPal expects its branded checkout segment to grow roughly 3% year-on-year in the fourth quarter, slowing from 5% in the third quarter and marking the weakest pace in at least three years. Bank of America said the deceleration could reinforce longer-term concerns about market share loss to newer payment methods, noting that branded checkout has recently been growing more slowly than overall e-commerce.
The bank lowered its 2026 and 2027 earnings estimates by 2% and 4%, respectively, to reflect slower growth and stepped-up investment. Analysts said there may be further downside if 2027 “also becomes an investment year as PYPL continues to need to invest to reinvigorate growth.”
Despite the downgrade, Bank of America said PayPal’s base of more than 400 million consumers and merchant accounts, along with a faster pace of innovation under new management, remain longer-term positives.