PayPal Holdings Inc.

The stable outlook reflects our expectation that PayPal will sustain its strong franchise while operating with low leverage (well below 1.5x) in the next two years. While we expect the company to remain exposed to direct lending, we think incremental loan loss provisions will be manageable and won't materially hurt its financial risk. We could lower the ratings if leverage approaches 1.5x--for example because of a very large acquisition--or if on-balance-sheet credit exposures and associated credit losses rise much faster than we expect. We could also lower the ratings if PayPal's risk appetite materially increases or if it suffers unexpected operational or reputational problems. We view an upgrade as remote in the next 24 months. S&P Global Ratings economists expect

...PayPal may need to operate with lower profitability compared with peers to defend or grow its market share. PayPal's revenue growth slowed to below 9% in 2022 and we expect it to remain below 10% in 2023. PayPal's profitability, as measured by EBITDA margin, dropped to about 25%. While that's still solid, it is lower than the margins most rated financial market infrastructure (FMI) companies generate. There could be changes in management or strategy as PayPal's new CEO takes over. PayPal's CEO, Dan Schulman--who has been instrumental in the company's strategy since PayPal's separation from eBay in 2015--stepped down at the end of September 2023. The newly named CEO, Alex Chriss, was a senior executive at financial software company Intuit, leading its business serving U.S.-based small-business and self-employed clients. We believe there could be further changes to the management of PayPal or some modifications to its strategy at a time where the company has had notable turnover among its...

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