PayPal Turnaround Shows Early Signs of Progress, D.A. Davidson Says

07:08 AM EDT, 10/28/2026 (MT Newswires) -- PayPal's (PYPL) third-quarter results showed early signs of progress in the payments company's turnaround amid improving execution and a more diversified approach to profitable growth, D.A. Davidson said in a client note. Earlier this year, PayPal announced a strategic reorganization under new Chief Executive Enrique Lores, who took over in March, to accelerate growth. The company announced plans to reorganize into three businesses and achieve at least $1.5 billion in gross annualized cost savings over two to three years. "(PayPal's third-quarter) results provided additional signs of progress as CEO Enrique Lores executes his three-year transformation strategy," D.A. Davidson's senior research analyst Eli Sanders wrote in the Tuesday note. "While the turnaround remains in the early stages, we are encouraged by improving execution and a more diversified approach to driving profitable growth." PayPal raised its full-year adjusted earnings outlook on Tuesday after reporting an unexpected year-over-year increase in third-quarter profit, though revenue fell short of market estimates. Shares were down 1% in Wednesday's premarket trading. PayPal now expects gross run-rate savings of more than $700 million exiting the fourth quarter, up from a prior projection of $400 million. The company said it intends to reinvest a significant portion of the savings in its highest-priority growth initiatives. PayPal is increasingly focused on financial services such as buy now, pay later, credit and debit, which represent more than 20% of its transaction margin dollars and are growing at a double-digit rate, Lores said on a call with analysts, according to a FactSet transcript. Branded checkout total payment volume rose 1% on a currency-neutral basis in the third quarter, slowing from 2% in the second quarter, weighed down by tariff-related pressure in Europe, according to the company's earnings presentation. D.A. Davidson said branded checkout remains the biggest area for improvement. RBC Capital Markets had flagged the possibility of a slight miss at PayPal earlier this week amid branded checkout growth tracking at the low end of guidance due to a greater-than-expected impact from European tariffs. Branded checkout trends in the US improved for a third consecutive quarter, while early results at merchants using the company's updated checkout process are encouraging, D.A. Davidson said. Greater contributions from the financial services, Venmo and Braintree can also support higher transaction margin growth without branded checkout returning to historical gains. During a conference call with analysts, Lores said the company's management and board remain open to alternatives that create more shareholder value than executing its current transformation plan. The Wall Street Journal reported in August that PayPal was in talks to sell itself to a group including Stripe and private-equity firm Advent International. However, the group abandoned its pursuit later that month, Bloomberg reported, citing people familiar with the matter. "We continue to view this as potential optionality rather than part of our core thesis," Sanders said. D.A. Davidson reiterated its buy rating on PayPal with a price target of $62. Also on Tuesday, payments giant Visa (V) reported stronger-than-expected fiscal fourth-quarter results. Mastercard (MA) is scheduled to release its quarterly earnings on Thursday.