Investing.com -- PayPal shares dropped 13% following its Q4 2024 earnings report, despite the company delivering a beat and a strong 2025 guidance.
Bernstein analysts believe the market’s reaction is excessive, stating, "we believe the negative stock reaction is overblown especially considering strong underlying numbers."
One key concern for investors was said to be branded volume growth, which increased 6% year-over-year FXN, but fell short of buyside expectations of 7-8%.
Bernstein attributes this to misaligned expectations rather than weak performance, noting, "US Branded (40% of Branded) accelerated by 3ppt while International decelerated by 1ppt."
While new modern experiences were expected to contribute more meaningfully, the firm points out that only 25% of US checkout volume has transitioned to these new experiences, compared to 5% last quarter.
Bernstein also sees several drivers supporting branded volume growth in 2025, including PayPal’s expansion of modern checkout experiences internationally, increased consumer habituation from debit card adoption, and growing traction in Venmo monetization.
They highlight "50% growth in Pay with Venmo and 40% in Venmo debit card TPV" but acknowledge that Venmo’s monetization efforts have faced setbacks in the past.
Overall, PayPal’s transaction margin dollars grew 6% ex-float, and the company is guiding for at least 5% growth in 2025. Braintree slowed to 2% growth, but Bernstein notes that pricing for value will drive 1ppt to TM dollar growth in 2025.
Given the sharp stock decline, Bernstein sees a more favorable near-term risk-reward but maintains a Market-Perform rating over a longer horizon due to uncertainty surrounding the branded business.
Bernstein believes the next key catalysts will be post-holiday earnings and PayPal’s investor day in February.