PayPal Holdings, Inc. (PayPal (PYPL)) shares are sliding Wednesday as investors digest a familiar story: a quarterly earnings beat that doesn't quite mask the underlying challenges. The company reported first-quarter revenue of $8.353 billion, up 7% year-over-year and above the $8.046 billion consensus. Adjusted earnings came in at $1.34 per share, beating the $1.27 estimate. But the market isn't celebrating.
Bank of America Securities analyst Matthew O'Neill reiterated a Neutral rating and lowered his price target from $55 to $53. His reasoning? The earnings beat was partly fueled by share repurchases, not stronger operating performance. In other words, the company is buying its way to better per-share numbers rather than growing the business organically.
O'Neill notes that investors remain unconvinced by PayPal's turnaround efforts under new leadership. While management is making gradual improvements, the latest earnings call didn't provide enough evidence of consistent execution or stable growth. "Investors were hoping for stronger, more decisive actions, especially since patience with the company is already wearing thin," he said.
The weak second-quarter guidance and unchanged fiscal 2026 outlook were key disappointments. Management outlined more than $1.5 billion in cost savings over the next several years, but O'Neill points out that most of those savings will fund reinvestment rather than boost near-term earnings growth. That's not what impatient investors want to hear.
Branded checkout growth, a core metric, remained "modest" despite easier year-over-year comparisons. Management expects growth near the lower end of its long-term target range. O'Neill also cited continued pressure on transaction margins and near-term expenses, even as the company returns capital to shareholders.
Despite the cautious tone, O'Neill raised his 2026 EPS estimate from $5.31 to $5.35 and his 2027 estimate from $5.46 to $5.76. So there's some optimism on the horizon, but the path to sustained execution and improving growth trends remains unclear.
PayPal shares were down 0.73% at $46.57 on Wednesday afternoon.
