MoffettNathanson has downgraded PayPal stock to “market perform”.
PayPal Holdings Inc (NASDAQ:PYPL) is down 1.3% in premarket trading at $63.41, following a bearish note from SVB MoffettNathanson.
The Wall Street brokerage has lowered its rating on shares of the payments company from “outperform” to “market perform” as Alex Chriss prepares to take over as President and CEO on September 27.
In a note, SVB MoffettNathanson analyst Lisa Ellis stated, “Looking forward, unfortunately, we expect PayPal’s gross-profit growth to remain lackluster.”
Prior to this downgrade, analysts were overwhelmingly positive about PayPal with 19 out of 30 brokerages rating it as a “buy” or better, while the remaining 11 recommended a “hold”. The average 12-month target price of $86.12 was a 34.1% premium to the stock’s closing price on Friday, suggesting potential for further downward revisions to price targets.
Additionally, a decline in options traders’ optimism may put further pressure on PayPal shares. The 50-day call/put volume ratio of the stock, which measures the volume of call options versus put options, is at 3.11. This ratio is in the 79th percentile of its annual range, indicating a relatively high level of bullish sentiment among options traders.
Premiums on PayPal options are currently priced attractively, with the security’s Schaeffer’s Volatility Index (SVI) at 28%, ranking higher than only 6% of annual readings. This suggests that options traders are pricing in low volatility expectations for the stock.
From a technical perspective, PayPal stock experienced a gap down in August following news of the c-suite shakeup. Since then, the $65 level has acted as a resistance, with the stock’s 80-day moving average preventing a rally above this mark on Friday. If the premarket losses hold, PayPal will fall below the -10% year-to-date level.
