Wall Street Downgrades Push PayPal Shares Into Sharper Focus as Jim Cramer Warns of Deeper Slide

PayPal Holdings, Inc. (NASDAQ:PYPL) moved further into the spotlight on December 22 after a new analyst note from Morgan Stanley lowered the investment bank’s stance on the digital payments firm. The report cut the stock’s rating to Underweight from Equal Weight and trimmed the 12-month price target to $51 from $74, citing slower adoption of PayPal’s checkout integrations, potential margin pressure and decelerating growth at subsidiary Venmo.

The downgrade drew immediate attention from television personality and market commentator Jim Cramer. Speaking on his program, Cramer called the Morgan Stanley analysis “devastating” and suggested the stock could decline further. “That stock’s going lower, maybe much lower,” he said during the segment that placed PayPal on his list of closely watched names.

Sequence of target cuts

Morgan Stanley’s action follows a series of downward revisions over the past month. On December 5, Deutsche Bank reduced its price target to $65 from $75 while maintaining a Hold rating. UBS delivered a similar message on December 4, reiterating Hold and setting an $80 target. Each firm pointed to weakening momentum in PayPal’s core checkout button, a trend that analysts warn could erode the company’s long-term transaction margins.

PayPal shares have experienced persistent pressure throughout 2025 as investors reassess the company’s competitive positioning. Year-to-date, the stock has lagged the broader technology sector, reflecting concerns about market share shifts toward alternative payment solutions and the impact of macro-economic conditions on discretionary spending.

Key factors behind Morgan Stanley’s view

In its note, Morgan Stanley highlighted several issues it believes could weigh on future performance:

• Checkout integration pace: The bank said merchant adoption of PayPal’s updated checkout tools appears slower than anticipated, limiting potential revenue uplift.
• Margin risk: With growth in higher-volume but lower-margin channels, Morgan Stanley forecasts continued pressure on operating margins.
• Venmo growth trends: Decelerating user and payment volume expansion at Venmo could reduce one of PayPal’s most important growth engines.
• Branded share loss: The firm cited evidence that PayPal’s branded button is losing share to alternative wallets and emerging real-time payment options.

Morgan Stanley’s revision brings its target price below the levels set by Deutsche Bank and UBS, underscoring divergent expectations across the analyst community. According to data compiled by PayPal’s investor relations filings, roughly half of the research houses covering the company now carry either Neutral or Underperform ratings, a shift from the more bullish outlook prevalent in early 2024.

Cramer’s inclusion of PayPal on watch list

PayPal is currently one of eight equities highlighted by Cramer as part of his ongoing market coverage. The television host, known for rapid-fire assessments of corporate news, emphasized the potential downside implied by Morgan Stanley’s forecast. His remarks follow several on-air critiques earlier in the year concerning PayPal’s competitive dynamics and executive turnover.

Imagem: light bulb with financial charts

Investor positioning and broader context

While the latest downgrade places additional scrutiny on PayPal, some market participants continue to view the stock as a turnaround candidate, pointing to cost-cutting initiatives and product updates designed to reignite transaction volume growth. However, the Insider Monkey article that gathered Cramer’s comments noted that its editors currently see greater upside in select artificial-intelligence-related stocks, which they argue combine lower valuation risk with exposure to manufacturing onshoring trends.

That perspective reflects a wider rotation among certain investors toward segments perceived as better insulated from consumer spending cycles. In contrast, PayPal remains closely tied to transaction activity in e-commerce, travel and peer-to-peer payments, all areas susceptible to macro-economic fluctuations.

What comes next

Analysts will monitor PayPal’s next quarterly report for updates on merchant adoption rates, margin trajectory and Venmo engagement metrics. Management previously indicated that product simplification and new checkout experiences are central to its 2026 strategy. Any evidence of renewed growth could help stabilize sentiment, though the current set of price targets implies limited near-term optimism.

For now, Morgan Stanley’s $51 target stands as one of the lowest on Wall Street, and Cramer’s televised warning has amplified the debate over how much further PayPal shares might fall. Market reaction in coming sessions will reveal whether the downgrade prompts additional reassessments among other brokerage firms.

Crédito da imagem: Denys Prykhodov / Shutterstock.com