Meanwhile, Marqeta and Lightspeed were upgraded.
PayPal’s stock is up 6 per cent year-to-date, no thanks to the Wall Street community.
SMBC Nikko Securities America analyst Andrew Bauch said in a report that the fintech sector has a better chance of a respectable showing in 2023 vs. other segments of technology. However, some names are expected to fare better than others, and unfortunately for PayPal, it isn’t one of them.
“Few names in our coverage carry as much baggage as we enter the new year,” wrote Bauch on PayPal. The analyst is worried about the erosion of PayPal's growth prospects amid a marked decline in investment, downgrading PYPL stock to "underperform" from "neutral" and lowering his price target from $95 to $75.
Bauch has sounded the alarm on PayPal for a while amid heightened competition in digital payments, where it competes with the likes of Block. Payment stocks continue to face headwinds in the economy that have spilt over from 2022, such as rising interest rates, inflation and the war in Ukraine.
Meanwhile, Bauch painted a different picture for some other fintech stocks, including Lightspeed Commerce and Marqeta. He upgraded shares of Lightspeed to outperform from neutral, saying that despite what some might consider “a leap of faith,” he believes the “once-beloved payments story can find new life in 2023.”
Bauch is also more sanguine on Marqeta, upgrading the card-issuing stock to "neutral" from "underperform". Marqeta is in the midst of a C-suite shuffle in which CEO Jason Gardner is stepping down. Also, the company is diversifying its revenue stream beyond Block, for which contracts are set to expire in 2024.
Meanwhile, PayPal CEO Dan Schulman spoke on a panel at the World Economic Forum in Davos, Switzerland this week. In a discussion about payments innovation, he points to a minimum of 2 billion or more people globally who are on the outskirts of the financial system currently and at least another 2 billion who are “poorly served by it,” paying exorbitant fees or interest rates for financial services compared to the more affluent.
The PayPal chief went on to say that in the US, roughly 66 per cent of adults are struggling to make ends meet each month.
“We have a good financial system…but I don’t think it’s doing the job that it needs to do, which is being an inclusive economy that brings everybody in together,” said Schulman.
PayPal is expected to report its Q4 2022 earnings on 9 February.