Morgan Stanley has reduced its price target on PayPal Inc. to $50.00 from $51.00 while maintaining an Underweight recommendation, pointing to a slowdown in the company’s branded checkout expansion.
The stock is trading around $55.51, close to a 52-week low of $55.02, and carries a price-to-earnings ratio of 11.15. A fair-value analysis indicates PayPal appears substantially undervalued relative to that benchmark.
In revising its outlook, Morgan Stanley lowered its 2026 branded checkout growth forecast to 3.3% from 3.9%. That change translates into transaction margin dollar growth of 3.4%, down from the prior 3.8% projection. The firm attributed the revision to negative commentary from PayPal management and weaker e-commerce trends in the fourth quarter.
One operational concern flagged by the analyst is the pace of merchant migration to PayPal’s new checkout experience. Only 25% of merchants have been moved to the updated checkout over roughly 15 months, and, among those merchants, only half are using the most optimized integration. Morgan Stanley notes that the optimized integration can deliver roughly a 1 percentage point improvement in conversion when implemented.
Despite the integration and growth concerns, a financial-strength score used in the valuation exercise remains strong, with PayPal recording a top-tier Piotroski Score of 9. Investors should also be aware that PayPal is scheduled to report quarterly results in six days, on February 3.
The analyst reduced its share-repurchase assumptions for PayPal, trimming expected buybacks to $4.5 billion in 2026, which the firm models as 75% of free cash flow, versus a previous assumption of $5.4 billion. Morgan Stanley suggested management would be better served by directing a larger share of capital toward accelerating checkout integration optimization, expanding Venmo acceptance, and preparing for agentic commerce transactions.
As a result of these revisions, Morgan Stanley lowered its 2026 adjusted earnings-per-share estimate for PayPal to $5.79 from $5.84. The firm also raised concerns that the company may have ceded checkout share to competitors to a greater degree during the holiday shopping period, particularly in the U.S., which accounts for approximately 40% of PayPal’s branded checkout volume.
Valuation metrics noted alongside the forecast adjustments show a PEG ratio of 0.58 for PayPal, indicating a low price-to-earnings multiple relative to growth expectations under the models used.
In corporate development news, PayPal has announced an agreement to acquire Cymbio, a multi-channel orchestration platform intended to strengthen the company’s AI commerce capabilities and help merchants merchandise across AI-driven platforms.
Other brokerages have offered differing views in recent coverage. Rothschild Redburn downgraded PayPal from Neutral to Sell and cut its price target from $70.00 to $50.00, citing competitive dynamics shifting in favor of traditional card networks. Cantor Fitzgerald initiated coverage with a Neutral rating and a $60.00 price target, noting ongoing strategic initiatives aimed at balancing growth across PayPal’s services. BTIG reiterated a Neutral stance ahead of the fourth-quarter results, calling out the stock’s decline since the third-quarter earnings release. Jefferies maintained a Hold rating with a $60.00 price target, pointing to a marked slowdown in UK e-commerce growth in December.
These analyst moves and corporate developments arrive as PayPal approaches its next earnings announcement, with market participants and shareholders likely to focus on execution of checkout integrations, buyback activity, and progress on Venmo acceptance and AI commerce initiatives.
Key points
- Morgan Stanley cut PayPal's price target to $50 and kept an Underweight rating, citing weaker branded checkout growth and softer e-commerce trends.
- 2026 branded checkout growth was lowered to 3.3% from 3.9%, and 2026 adjusted EPS was reduced to $5.79 from $5.84; share buyback assumptions trimmed to $4.5 billion from $5.4 billion.
- Operational execution issues include only 25% of merchants migrated to the new checkout over about 15 months and limited adoption of the most optimized integration that can lift conversion by around 1 percentage point.
Sectors impacted
- Payments and fintech, through branded checkout adoption and competitive dynamics with card networks.
- E-commerce and retail technology, due to checkout integration performance and merchant conversion implications.
- Capital allocation and financial markets, via buyback expectations and near-term EPS guidance.
Risks and uncertainties
- Slower-than-expected uptake of PayPal’s new checkout could constrain transaction and conversion growth, affecting payments and e-commerce sectors.
- Holiday-season share shifts toward competitors may have become more pronounced, particularly in the U.S., which is a significant portion of branded checkout volume.
- Reduced share-repurchase expectations limit a potential source of capital return to investors and could influence near-term stock support.