PayPal Stock Tumbles 1.22% as Trading Volume Ranks 60th Amid Morgan Stanley Downgrade and Weak Revenue Guidance

Market Snapshot

PayPal Holdings (PYPL) closed December 31, 2025, , marking a continuation of its recent underperformance. , placing it 60th in terms of market activity. , the stock has struggled to recover amid broader analyst skepticism. The firm’s third-quarter results, , . , further dashing investor optimism. PayPal’s fourth-quarter revenue guidance now anticipates low single-digit growth, , compounding concerns about its ability to maintain momentum in the digital payments sector.

Key Drivers

Morgan Stanley’s recent downgrade of PayPal’s stock from Equal Weight to Underweight, , has cast a shadow over investor sentiment. The firm cited structural challenges, including the difficulty of upgrading PayPal’s branded checkout integrations, which it views as a time-consuming and costly endeavor. Additionally, Morgan Stanley highlighted a lack of revenue growth from Venmo, a key platform within PayPal’s ecosystem, alongside declining take rates and share losses in competitive markets. These factors, according to the firm, are expected to constrain PayPal’s dollar growth through 2028, creating an “overhang” on the stock’s valuation. The downgrade followed a revision of PayPal’s profit and margin projections, reflecting a more cautious outlook on the company’s ability to scale its core business.

PayPal’s third-quarter earnings report, released on October 28, 2025, underscored these concerns. , . The company’s fourth-quarter guidance, however, proved even more detrimental, . This weaker outlook, , triggered a sharp selloff in shares. Analysts have noted that PayPal’s reliance on high-growth initiatives, such as its (AI-driven transactional capabilities), remains unproven at scale, leaving the stock vulnerable to macroeconomic headwinds and regulatory scrutiny in the fintech sector.

The broader analyst sentiment has also shifted toward caution. Over the past month, several firms have revised their ratings on PayPal, with Morgan Stanley, Evercore ISI, and Compass Point among those downgrading the stock. , with a consensus rating of “Hold.” However, the divergence in recommendations—ranging from “Strong Buy” to “Sell”—reflects uncertainty about PayPal’s strategic direction. For instance, Mizuho and Jefferies have maintained “Buy” ratings with higher price targets, emphasizing PayPal’s dominance in digital payments and potential for margin expansion. Conversely, firms like Baird and BofA Securities have downgraded the stock, citing concerns over stagnant Venmo growth and intensifying competition from rivals like Square and Stripe.

Underlying business challenges further exacerbate these concerns. PayPal’s Venmo segment, which has historically driven user acquisition and cross-selling opportunities, has seen revenue stagnation and user share erosion. Meanwhile, the company’s —the percentage of transaction value retained by PayPal—has declined due to pricing pressures and increased competition in the buy-now-pay-later (BNPL) segment. Analysts at Morgan Stanley and others have warned that these trends could persist, particularly as PayPal’s investments in AI and blockchain face regulatory and technical hurdles. Additionally, the firm’s exposure to macroeconomic factors, such as rising interest rates and consumer spending shifts, adds another layer of risk for investors seeking long-term growth.

In contrast to PayPal’s struggles, some analysts have redirected attention to AI-driven stocks, which they argue offer more attractive risk-reward profiles. This shift in focus, coupled with PayPal’s recent performance, has led to a reevaluation of its role in diversified portfolios. While the company remains a key player in digital payments, its ability to innovate and scale in a rapidly evolving market will be critical to regaining investor confidence. For now, the combination of weak guidance, analyst downgrades, and structural business challenges suggests that PayPal’s stock is likely to remain under pressure in the near term.