Needham has reiterated a Hold recommendation on PayPal (NASDAQ:PYPL) after the payments company reported fourth-quarter results that fell short of market forecasts and issued guidance for the first quarter and fiscal 2026 that came in below consensus, according to Needham research.
The analyst note highlights several data points that underpin continued caution. While PayPal's total payment volume expanded by 9% year-over-year, that gain was tempered by declining take rates as growth in Branded Checkout stalled. Margins disappointed as the company increased spending on strategic initiatives.
On the leadership front, PayPal confirmed a management change, naming Enrique Lores, currently CEO of HP, as its new President and CEO. He will replace Alex Chriss. The board said execution "has not been up to par," a comment Needham frames as context for the leadership shift and a potential step to address recent operational shortfalls.
Despite operational headwinds, several balance-sheet and profitability metrics remain notable. Needham's note cites a gross profit margin of 41.56% and a Piotroski Score of 9, both indicators of resilient underlying financials. On valuation, Needham estimates PayPal's ex-cash FY26 price-to-earnings multiple at roughly 7x, yet retains a neutral stance because it "does not see a positive catalyst on the horizon." Separately, InvestingPro data referenced in the note shows a trailing P/E of 8.47 and a PEG ratio of 0.54.
Market reaction and analyst responses have been mixed. InvestingPro data indicates 11 analysts recently trimmed earnings estimates for the upcoming period, signaling growing skepticism about the near-term outlook. Raymond James reiterated a Market Perform rating, pointing to a slowdown in Branded Total Payment Volume. Evercore ISI reduced its price target for PayPal to $40, citing concerns about decelerating growth and underwhelming fiscal 2026 guidance. Truist Securities maintained a Sell rating with a $58 price target, flagging the potential for further downside.
PayPal's reported fourth-quarter results for fiscal 2025 included earnings per share of $1.23, missing the consensus estimate of $1.29, and revenue of $8.68 billion, below the forecasted $8.79 billion. In a separate disclosure, the company set March 1 as the date Enrique Lores will take over as CEO.
Needham's decision to hold reflects a view that, while valuation metrics may appear attractive on a relative basis, the firm sees an absence of clear, imminent catalysts to justify a more positive rating. The combination of slowing branded checkout expansion, lower take rates and rising investment expense has created a more uncertain near-term earnings trajectory, prompting analysts to reduce forecasts and some to lower price targets.
For investors, the juxtaposition of solid profitability measures against weakening top-line dynamics and guidance underscores a period of transition for the company. The board's acknowledgement of execution issues and the planned leadership change signal management's intent to address performance, but sell-side sentiment remains cautious until clearer evidence of operational improvement appears.
For further detail: Investors can consult the comprehensive research available through the InvestingPro platform, which includes Pro Research on PayPal and more than 1,400 other U.S. equities.