MW PayPal has some big new growth targets. Can it hit its marks?

By Emily Bary

One analyst says the new growth goals seem achievable. Another worries competition from Apple Pay might get in the way.

Following PayPal Holdings Inc.'s investor day on Tuesday, one analyst said it's now time to get to work on the big targets just unveiled.

The company's investor day "laid out a very compelling vision of the future, with the company set to pivot away from 'payments' and into 'commerce,'" Barclays analyst Ramsey El-Assal wrote. "Now, execution has become the most important part of the story."

PayPal shares (PYPL) are up 25% over the past 12 months, but they're down 13% so far this year and 76% off their 2021 closing high. The company has won back some goodwill on Wall Street with its new management team, but investors are looking for more progress on the company's ability to keep up with fierce competition from the likes of Apple Inc.'s $(AAPL)$ Apple Pay and expand further beyond checkout into areas including advertising.

At Tuesday's event, PayPal rolled out its fiscal 2027 targets, including for 8% to 10% growth in branded checkout volume. That's up from the 6% growth seen in the latest quarter. On the whole as a company, PayPal expects to keep growing volume more quickly than e-commerce.

"We believe [PayPal] threaded the needle on guidance, setting near-term goals that appear quite achievable with longer-term targets above investor expectations, in our opinion," El-Assal wrote. He has an overweight rating and $110 target price on PayPal shares.

Other analysts are in more of a wait-and-see mode, with William Blair's Andrew Jeffrey discussing PayPal's expectation for high-single-digit growth in transaction-margin dollars, a measure of profitable volume, by 2027. The company is aiming for 10%-plus growth on the metric over a longer span.

"We are skeptical that investors will embrace these targets given competition from Apple Pay, Adyen (NL:ADYEN), and others," he wrote. "We have particularly low conviction that PayPal can drive a higher long-term transaction yield, creating a headwind to transaction dollar growth."

Similarly, he noted various outpoints from PayPal's management, including that those who use Venmo as their primary banking relationship deliver 10 times better revenue per account than those who just use Venmo to send money to friends. PayPal also mentioned that when Braintree merchants take on all available services, they see 12 times or more growth in transaction dollars relative to others.

"We believe that these are impressive economic statistics, but lack confidence that PayPal can drive widespread adoption of these value-added solutions given late timing to market and comparable technology on more integrated competing platforms," Jeffrey added, while sticking with his market-perform rating.

PayPal shares ended Tuesday's session down 1.6%.

Meanwhile, Seaport Research's Jeff Cantwell said he and his team "like what we heard and the day packed plenty of interesting data points," but they're looking for more evidence that PayPal can deliver a material pickup in checkout growth before turning bullish on the stock. Cantwell reiterated his neutral rating.

John Davis of Raymond James took a similar stance.

"All told, while [management's] execution to date has no doubt been impressive, the 2027 targets set a high bar, and we need to see further evidence the numerous initiatives are bearing fruit before becoming more positive on the stock," he wrote, while maintaining his market-perform call.

-Emily Bary

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February 25, 2025 21:56 ET (02:56 GMT)

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