Shares of payment company PayPal Holdings (ppl) fell more than 1.5% in pre-market trading. As of 1:40 pm ET, PayPal shares fell more than 3%. On July 29th, Guggenheim’s Jeff Cantwell downgraded PayPal’s rating from “neutral” to “sell”. Cantwell also set the target price of the stock at $104. The new target reflects a 9.9% drop in the company’s share price compared to the closing price of $115.49 on July 26.
According to CNBC, Cantwell expects the stock to encounter many resistances in 2020. These unfavorable factors, including the separation of eBay, Brexit and European regulatory reforms, may hinder the growth of PayPal. The analyst expects revenue to fall next year. In addition, the departure of the company’s major executives also put pressure on its stock. In mid-February, Guggenheim downgraded PayPal’s rating from “buy” to “neutral.”
Guggenheim said the company may face a weak income growth in the future. Last week, in its second-quarter earnings, PayPal’s revenue was lower than expected. PayPal’s revenue of $4.31 billion in the second quarter increased 12% year-on-year. However, this was lower than analysts’ expectations of $4.33 billion. Since the first quarter of 2018, the company’s revenue growth has been slowing.
PayPal lowered its full-year revenue forecast. The California-based company currently expects revenues in 2019 to be between $17.6 billion and $17.8 billion. This trend means a growth rate of 14%-15% in 2019, which is lower than the company’s previous 16%-17% growth trend. PayPal attributed its revenue decline to product integration and currency delays. The delay in the company’s pricing plan may further affect its revenue.
PayPal’s sales in 2019 are expected to decline year-on-year. The company’s revenue in 2019 is also expected to increase by 15.1%, down from 18% in 2018. It is estimated that by 2020, its sales will increase by 18.1%.
PayPal’s current P/E ratio is 37.1 times, which is 31.1 times its expected earnings per share of $3.11 in 2019 and 32.9 times its expected earnings per share of $3.51 in 2020.
Of the 42 analysts who track PayPal, 32 rated their stocks “buy” and nine others rated them “hold”. Only one analyst suggested “selling” the stock. Analysts’ average target price for PayPal is $125.37. This means the stock has 8.6% potential upside potential from current levels.
Despite the slowdown in revenue growth, PayPal’s stock has risen nearly 37.3% since the beginning of the year, making it attractive for valuation. In contrast, the Standard & Poor’s 500 index fell by 0.21% as of July 26 this year.