The digital payment industry is facing a severe test. Goldman Sachs Group, Inc. downgraded PayPal (PYPL.US) rating to "sell".

Goldman Sachs Group, Inc. has downgraded PayPal (PYPL.US) to "sell" due to pressure on profit margins and a slowing growth path until 2026, with a new target price of $70. This downgrade highlights investors' increasing concerns about profit margin pressure and slowing growth in the digital payment sector. The investment bank points out that PayPal will face multiple obstacles next year: ongoing interest rate pressure, diminishing benefits from existing credit products, and weakening pricing benefits for the Braintree business unit. Goldman Sachs Group, Inc. particularly emphasizes the challenges PayPal faces in promoting its branded checkout service - obstacles in the German market, disruptions from changes in U.S. tariffs and small value exemption policies, and continued pressure from competitors in the digital wallet space. Analysts wrote in their report, "If the core business cannot accelerate growth, combined with the fading of multiple one-time favorable factors in 2026 and ongoing interest rate headwinds, the growth in transaction profit margins may be lower than the market generally expects." Goldman Sachs Group, Inc. currently forecasts a 3% growth in PayPal's transaction profit margins in 2026, while the market expects around 5%. The institution also warns of the risk of rising operating expenses, as PayPal is increasing marketing efforts for its "buy now, pay later" products (recently launching a 5% promotional offer). Goldman Sachs Group, Inc. expects this to further drag down earnings per share, with downside risks becoming more significant. This downgrade comes as tech and payment stocks are undergoing a widespread reevaluation. Goldman Sachs Group, Inc. points out that individual stock coverage has decreased by about 5% since the recent earnings season, indicating investors' cautious stance on fourth-quarter earnings reports. In addition to PayPal, Goldman Sachs Group, Inc. has also downgraded Marqeta to "sell", but remains optimistic about the short-term prospects of a few companies such as FIS, Toast, and Globe Life.