PayPal downgraded at Bernstein on competition, valuation

PayPal Holdings (NASDAQ:PYPL) was falling after Bernstein downgraded the payments technology company on competition and valuation concerns.

PYPL was trading 1.70% lower Thursday pre-market at $80.26.

Bernstein downgraded its recommendation on the stock to Market Perform from Outperform, but raised the price target to $80 from $75.

"While product velocity is improving, we remain worried about competitive pressures on the cash-cow core button, which often is still richly priced vs. peers," said Harshita Rawat in a research note.

"Further, we see some risks of negative revisions (on gross profit) into 2025 because of exposure to interest rates," said Rawat.

Bernstein had upgraded the stock at July-end on better product velocity and execution under new management, improving profit and attractive valuation. However, there is no upside to the price target given the stock performance recently.

PYPL has gained ~33% year-to-date, and is currently trading 26% above its 200-day simple moving average.

The average sell-side analyst rating on the stock is Buy.

Meanwhile, the Seeking Alpha authors as well as the Quant Rating system grades the stock as Strong Buy.

"The firm has finally shown that it can turn itself around, and management continues to innovate. Add on top of this how cheap shares are, both on an absolute basis and relative to similar enterprises, and I do believe that maintaining it as a 'strong buy' makes sense right now," said SA contributor Daniel Jones.