MoffettNathanson downgraded PayPal stock to "market perform"
PayPal Holdings Inc (NASDAQ:PYPL) is 1.3% lower at $63.41 premarket, following a bear note from SVB MoffettNathanson.
The Wall Street brokerage downgraded shares of the payments company to "market perform" from "outperform," as Alex Chriss sets to take over as President and CEO on Sep. 27. SVB MoffettNathanson analyst Lisa Ellis said in the note, "Looking forward, unfortunately, we expect Paypal's gross-profit growth to remain lackluster."
Coming into today, analyst sentiment was overwhelmingly positive, which leaves plenty of room for additional downgrades. Specifically, 19 of 30 covering brokerages rated PYPL a "buy" or better, while the remaining 11 recommended a tepid "hold." What's more, the equity's average 12-month target price of $86.12 is a 34.1% premium to Friday's close -- implying even more room for price-target cuts.
An unwinding of options traders' optimism could also weigh on the shares. This is per PayPal stock's 50-day call/put volume ratio of 3.11 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) that ranks in the 79th percentile of its annual range.
Premiums are affordably priced at the moment, too. This is per the security's Schaeffer's Volatility Index (SVI) of 28% that sits higher than only 6% of annual readings, suggesting these traders are currently pricing low volatility expectations.
On the charts, PayPal stock gapped lower in August, following news of the c-suite shakeup. On a closing basis, the $65 level has acted as a ceiling since the dip, with the equity's 80-day moving average rejecting a rally above this mark on Friday. Should today's premarket losses hold, PYPL will move below the -10% year-to-date level.