Redburn analyst Fahed Kunwar downgraded PayPal (PYPL) to Neutral from Buy and reiterates a Sell rating on Block (SQ). The analyst sees a “perverse correlation at play,” with the rising probability of a recession leading to falling interest rate expectations, which in turn leads to a rerating of finance technology stocks. Deteriorating e-commerce trends, rising funding costs, changes to share-based compensation and a “fragile” unsecured market will result in “more downgrades to disruptor names,” Kunwar tells investors in a research note. The analyst cut his forecasts by 15% for Block, Adyen (ADYEY) and PayPal. Although PayPal’s free cash flow yield is attractive, consensus estimates “remain too optimistic,” contends Kunwar.
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