PayPal Stock Slump Shows that Just “AI” Isn’t Enough to Shock the World
Last week, PayPal’s (NASDAQ: PYPL) recently-appointed CEO Alex Chriss said the company’s “Innovation Day” event would “shock the world.” However, at the Thursday event where PayPal introduced new AI features, analysts’ and investors’ reactions suggested that these innovations were less groundbreaking than stated. PayPal’s stock closed the day at $60.71, a 3.67% drop. The shares are also trending downwards in the premarket trading session at the time of writing.
PayPal Vowed to “Shock the World,” But Investors Left Unimpressed with Basic AI Features
PayPal announced on Thursday the introduction of new products powered by artificial intelligence, the first major initiative under the leadership of new CEO Alex Chriss, who joined the company in September.
Notably, the company unveiled six new features to improve its platform, all leveraging AI technology. These enhancements aim to boost merchant sales, streamline the checkout experience, and offer tailored promotions to customers.
One of the new features is “Smart Receipts,” which is designed to analyze customer purchase history and predict future interests, enabling merchants to provide customized recommendations and cashback deals.
Furthermore, PayPal is introducing an advanced offers platform, allowing merchants to target customers more effectively by utilizing detailed shopping data, including specific products and stock keeping units (SKUs). The platform will essentially enable merchants to craft more relevant offers based on actual purchase behavior.
PayPal has also unveiled “Fastlane,” a new “one-click” checkout feature that, according to initial tests, speeds up the checkout process by almost 40%. In addition, the company announced updates to Venmo business profiles aimed at enhancing their functionality.
Last week, Chriss said PayPal’s presentation would “shock the world,” however, the analysts do not see the new additions as revolutionary.
“We do not think investors will view any of them as groundbreaking new information,” said Andrew Harte, an analyst at BTIG. Instead, these are “initiatives they would have expected the company to already be working on,” he added.
Judging from PayPal’s stock price action, Harte is likely right. The fintech giant’s shares closed 3.6% lower on Thursday and dropped an additional 0.6% in premarket trading Friday.
Over the past year or so, artificial intelligence has captured significant market attention, leading to a notable increase in its mention during earnings conference calls. FactSet’s analysis of S&P 500 companies’ calls between June 15 and September 7 revealed that 177 companies referred to “AI” in their Q2 calls, a substantial rise compared to the 5-year and 10-year averages of 60 and 37, respectively.
PayPal Stock Price Analysis
Driven by improving macroeconomic conditions and the relentless march of Big Tech companies, the S&P 500 rose to a new all-time high this week. However, PayPal’s price action this year did not follow this trend, with its shares down 1.2% since Jan. 1.
The negative performance continues PayPal’s negative gains of -13.7% in 2023. The downtrend resulted from several factors, including slowing revenue growth, rising fintech competition, and the changed post-pandemic landscape.
The stock faced a series of downgrades by Wall Street analysts in recent weeks, including those from Mizuho Securities, Morgan Stanley, BTIG, and Oppenheimer. However, the average 12-month price target for the stock still implies a 24.5% upside from the current share price.
Where do you expect PayPal’s shares to end the year? Let us know in the comments below.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
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