PayPal Faces Branded Growth Pressure

Wolfe Research downgraded PayPal to Peer Perform, citing doubts about whether PayPal can sustain branded growth despite operational improvements. The brokerage acknowledged that PayPal has streamlined services and enhanced Venmo and Braintree, but PayPal’s main branded checkout segment has yet to prove consistent expansion. Investors remain focused on PayPal’s ability to increase branded payment volumes, which is critical for long-term profits and market share.

PayPal expects a modest rise of about 5% in branded volumes this quarter, helped by easing tariffs. However, consumer spending weakness and slower retail activity in Germany are weighing on PayPal’s outlook. Wolfe noted that a fourth-quarter acceleration seems unlikely due to tough U.S. comparisons and a slower-than-expected rollout of PayPal’s “modern checkout” experience.

Competition in buy-now-pay-later services and the need to boost Pay with Venmo adoption also pressure PayPal. Management targets 8–10% branded growth by 2027, but Wolfe described this as a “show-me story,” emphasizing that PayPal must deliver at least 7% growth to gain credibility. Shares are down 19% this year, underperforming both the S&P 500 and peers. Wolfe lowered the fair value range for PayPal to $70–$80 from $85, suggesting the stock may trade sideways until PayPal proves its core engine can re-accelerate.

Potential upside for PayPal could come from faster-than-expected branded gains, new product launches, or higher capital returns. However, achieving these catalysts requires patience. Overall, PayPal continues to face pressure from competition, regulatory challenges, and consumer spending trends, making investors cautious. The firm’s ability to sustain PayPal-branded growth will remain key for market confidence in the near term.