Exane cuts PayPal to Neutral on weak transaction margin outlook
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BNP Paribas Exane downgraded PayPal (NASDAQ:PYPL) to Neutral from Outperform on expectations of lower transaction margin for the year and mix impact during Q1.
Shares of PayPal (PYPL) -3.7% in afternoon trade.
"Management's commentary points to lower transaction margin (essentially gross profit) for the rest of the year than it initially anticipated and despite stronger volumes in both Checkout and Unbranded," said analyst Thomas Poutrieux. "We understand Checkout saw an unsupportive mix with large Enterprises leading the growth, whilst platform transitioning also had an impact. We believe tiered-pricing might also weigh on Braintree's take-rate the way it does on Adyen's."

Poutrieux expects ~12% normative EPS growth for PayPal (PYPL), compared to prior outlook of EPS growth by ~20% CAGR over the medium term.
"We worry about greater execution risk in the current context of cost cutting, upcoming management change, and low visibility on the new strategy," he cautioned.
Wall Street analysts on average rate PayPal (PYPL) Buy, but SA Quant rates the stock Hold.


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