PayPal shares drop after Bernstein downgrades stock amid rising competition

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  • PayPal shares fell on Wednesday after analysts at Bernstein downgraded the stock to a buy par.
  • Analysts cited concerns about increased aggregation on e-commerce platforms like Amazon and Shopify, and innovations in purchases now pay later as some disruptions to the business

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PayPal’s shares sank more than 5% on Wednesday after analysts at Bernstein cut the stock from $260 to $220 off the buy par, citing fears that the company would face a wider range of risks. Is.

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PayPal’s shares are down about 13% for the year while the Nasdaq Composite is up 25%.

“It’s hard not to accept PayPal’s position as a leading digital wallet in a rapidly growing digital world (one of the reasons we upgraded the stock 2 years ago).” That said, we believe the analysts wrote. ​—Change is accelerating, and PayPal now runs the risk of being disrupted rather than being disrupted.”

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Bernstein’s analysts are concerned about the increasing concentration of e-commerce around large platforms such as Shopify and Amazon, which account for 32% of the US e-commerce market.

Shopify is “emerging as an unstoppable competitor” to PayPal’s core small and medium-sized business market, analysts said, and poses another risk as it launches its payments platform. Similarly, Amazon is set to begin accepting PayPal’s Venmo as an alternative payment in 2022, but Bernstein believes Venmo is currently “seriously under-monetized.”

Analysts are even more concerned that PayPal is “in the throes of a thousand cuts” from other payment solutions ranging from Apple Pay and Square to Buy Now, Pay Now options from Affirm and Klarna, which offer 50% and 100% a year. growing in between. analysts wrote.

“We believe that Square’s pending acquisition of Afterpay is changing the game and accelerates our efforts toward becoming a leading payments ecosystem in the US,” wrote the analysts, noting that PayPal faces competitive risks. Because Square moves online and further competes against PayPal with the Cash App.

“While PayPal is actively investing in and growing, it is more turf to protect versus peers in our view,” he wrote.

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