On Thursday, Seaport Global analyst Jeff Cantwell downgraded two companies — PayPal Holdings (NASDAQ:PYPL) and Bill Holdings (NYSE:BILL) — as he has lost confidence that either will eventually meet their previously stated guidance in this new paradigm.
PayPal went from Neutral to Sell and Bill went from Buy to Neutral.
What Happened: Cantwell adjusted his numbers and price targets lower across the board in Fintech ahead of earnings. This reflects how this new, emerging ‘tariff-heavy’ paradigm will eventually impact names under his coverage.
Federal Reserve Chair Jerome Powell also signals that the Fed can’t help, at least not yet. Therefore, most of the adjustments to his numbers also hone in on the back half of fiscal 2025 and 2026.
While first-quarter results should be benign, Cantwell now expects consumer and business spending to eventually start to slow in response to the tariffs’ disruptive effect, likely by the summer months at the latest.
Also Read: PayPal Transaction Margins and Payment Volume Drive Growth, Eyes 2025 Growth With Strong TMD Ahead of Investor Day: Analyst
Why It Matters: The analyst predicts PayPal will struggle to meet its medium-term guidance at Investor Day. Cantwell projected fiscal 2025 revenue of $32.68 billion and EPS of $4.95.
For Bill, he noted the downside to its guide of 20% core revenue growth in fiscal 2026.
For both companies, his updated forecasts are now below consensus.
Regarding the stocks, Fintech has been selling off in recent weeks, and valuations again look fairly reasonable at 3.9 times NTM EV/Sales, 10.9 times EV/EBITDA, and 17.9 times EPS (all medians).
Given that first-quarter results generally reflect a positive fundamental backdrop for Fintech, Cantwell noted investors could see a near-term rebound (‘relief rally’). However, given his expectation for heightened stock volatility and downside risk to consensus EPS in the near term, he noted investors should be prudent/selective buyers.
For Bill, Cantwell projected fiscal 2025 revenue of $1.45 billion and EPS of $1.93.
Price Actions: PayPal stock is up by 0.85% at $60.76 at last check Thursday. Bill is down 1.88%.
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