PayPal stock pops as Mizuho says pricing concerns ‘largely overblown’, buy on weakness

Mizuho analysts reiterated a Buy rating and a $92 per share price target on PayPal (NASDAQ:PYPL), following the recent stock underperformance.

The analysts remind investors that PYPL shares have underperformed tech-heavy Nasdaq in the last 3 weeks. They believe investors are growing increasingly concerned about the pricing compression.

“Our analysis helps bridge ~9bps (or ~75%) of the ~12bps net transaction take rate decline (i.e. from 98bps in 1Q22 to 87bps in 1Q23). While the remainder could potentially be due to lower pricing, we believe that it is instead more likely a function of intra-segment mix shift (e.g. from small to large merchants). As a result, we believe worries about broad-based pricing compression are largely overblown,” the analysts said in a client note.

“The analysis shows that about 75% of the 1Q decline in net transaction take rate can be directly attributed to mix shift to Braintree.”

PayPal shares are up 1.4% in pre-market Tuesday. The stock is down 15.5% year-to-date.