PayPal shares are having a tough year.
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Payment stocks
Block
and
PayPal Holdings
were both falling on Tuesday. Don’t write them both off, said a BMO Capital Markets analyst.
Analyst Rufus Hone took over coverage of Block at the firm. He kept an Outperform rating on shares and cut the price target to $84 from $93. Shares were down 1% to $64.36 Tuesday.
Hone also assumed coverage of PayPal at Market Perform with a $65 price target. PayPal stock was down 3.2% to $57.92.
In his note, Hone expressed that he was feeling upbeat about Block, the former Square company and owner of Cash App, despite the price cut.
“We foresee durable gross profit growth across both Cash App and Square Seller over the medium-term, in tandem with much greater urgency around margin improvements,” the analyst wrote.
“While we see significant execution risk in achieving SQ’s 2026 targets, we believe there could be a series of ‘quick wins’ for SQ to capture on
the cost side, benefiting sentiment near-term,” he added.
Hone’s views on PayPal, however, were more tentative.
“PYPL shares have been pressured due to investor concerns around market share losses, an aggressive pricing environment in unbranded processing, and slower e-commerce growth,” he said, adding that though shares are trading cheaply, it may prove difficult for the stock to jump without a significant uptick in gross profit growth.
BMO expects mid-single-digit growth in 2024 and 2025 for PayPal, less than Wall Street’s call for mid-to-high single-digit growth.
Shares of Block are up 2.5% this year, while PayPal has fallen 19% over the same period.
Write to Emily Dattilo at [email protected]
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