Growth in payments subsidiary Braintree is hurting PayPal, according to Susquehanna.
Analyst James Friedman downgraded the stock to neutral from positive, and lowered his price target, saying Braintree's higher transaction expenses and lower gross yields will create yield and margin pressure for PayPal in 2023 and 2024.
"Braintree is quickly gaining share within PYPL's TPV, creating negative leverage from mix," Friedman wrote in a Tuesday note, referring to total payment volume.
"Braintree's lower net transaction yield and gaining volume share explain much of the decline in PYPL's overall net transaction yields, and imply more stable yields within PayPal Core," the note says.
Shares of PayPal cratered this year as traders pivoted away from fintech stocks amid growing inflation and recession concerns.