Compass Point moved PayPal Inc. (PYPL) off its Sell list to a Neutral rating on Wednesday, even as the research firm trimmed its price target to $51 from $55. The stock has been trading near its 52-week low, changing hands around $41.70 versus a 52-week floor of $41.43, and has dropped roughly 23% over the last week.
Data from InvestingPro referenced in the report indicates PayPal may be trading below what that service considers its Fair Value. Compass Point described several reasons for the rating change, chief among them that much of the near-term uncertainty tied to an executive leadership transition appears to already be priced into the shares.
On fundamentals, Compass Point expects fiscal 2026 diluted earnings per share to range from slightly down to slightly up versus the prior year. At the same time, the firm highlighted the companys strong accounting and balance-sheet metrics, noting a perfect Piotroski Score of 9 that reflects favorable signals across profitability, leverage, liquidity and operating efficiency.
Despite the relatively robust financial-health indicators, the report pointed to structural and execution concerns. Compass Point raised questions about PayPals loss of market share and the companys medium-term effort to migrate merchants to its revamped branded checkout experience. Those issues, the firm argued, limit the potential for meaningful upside in the near term.
Specifically, the research note said the branded checkout business could see sustained pressure, even as PayPal projects flat to low-single-digit growth for 2026. On a forward multiple basis, the stock is trading at about 7.0 times Compass Points 2027 adjusted EPS estimate, which the firm said is comparable to specialty finance and other volume-driven consumer finance names.
The report also highlighted managements aggressive share-repurchase activity, which Compass Point views as a key support for the companys lower valuation levels. The firm observed that near-term EPS growth may be heavily reliant on those buybacks, stating it would likely take "many years" to materially reverse market share trends and reestablish a path to meaningful organic upside, and that near-term EPS growth is "almost totally dependent on buybacks." PayPal generated diluted earnings per share of $4.98 over the trailing 12 months, a figure the note reiterated while describing a relatively low price-to-earnings ratio compared with the companys near-term earnings-growth profile.
PayPals in-depth Pro Research Report, available to subscribers, was referenced as a source for additional analysis of the $38.4 billion fintech firm and the factors driving its business.
The Compass Point update comes amid a cluster of recent analyst reactions to PayPals results and guidance. In its fourth-quarter release, PayPal missed adjusted EPS by roughly 5% and recorded transaction margin dollars about 1% below consensus expectations. Needham flagged the companys guidance for the first quarter and full-year 2026 as falling short of expectations, and maintained its Hold rating even as it noted the CEO change.
Several firms subsequently adjusted their price targets or ratings: Evercore ISI lowered its target to $40, attributing the move to decelerating growth in Branded Online transactions and a lack of near-term improvement tied to the fiscal 2026 outlook. TD Cowen cut its target to $48 and described 2026 as a "transition year," citing execution challenges and the need for investment to shore up transaction margin dollars.
Other brokerages took a more conservative posture on PayPals medium-term prospects. William Blair reiterated a Market Perform rating while noting both sector-wide fintech challenges and an abrupt downgrade to PayPals financial outlook, also referencing the CEO change in its assessment. Raymond James maintained its Market Perform stance following the quarterly miss, pointing to a slowdown in Branded TPV growth and an ongoing gap versus e-commerce expansion.
Taken together, the analyst commentary frames a company that remains profitable and supported by share repurchases but faces significant execution and growth headwinds that could keep upside limited in the near term.
For investors and market participants focused on payments, fintech and e-commerce, Compass Points move signals an environment in which valuation support and capital-return programs are partially offsetting operational weaknesses and a challenging transition year ahead.