PayPal downgraded to Perform at Wm. Blair amid intensifying competition

William Blair downgraded PayPal Holdings (NASDAQ:PYPL) to Market Perform as analyst Cristopher Kennedy sees limited levers that the payments tech company can pull to spark renewed organic revenue growth and/or transaction dollar margin.

“While we believe PayPal has begun, and should continue, stabilizing transaction processing volume (TPV) growth and driving less transaction margin dollar degradation through recent initiatives, we struggle to imagine a path to meaningful TPV growth acceleration and/or transaction margin dollar acceleration, which would be key valuation catalysts,” the analyst wrote in a note to clients.

While he’s a fan of Alex Chriss, and considers the new CEO’s initiatives as incremental positives, three primary competitive forces are expected to persist and could intensify in the next few years, Kennedy said.

First is Apple’s (AAPL) consumer-facing fintech investments, primarily Apple Pay. “Apple Pay’s native app status on the company’s iPhone creates an intrinsic competitive advantage, in our opinion, particularly as U.S. contactless payment adoption rises,” the analyst wrote. Next, Apple’s announce phone-to-phone payments with its new iOS release could pressure PayPal’s (PYPL) ability to monetize Venmo. Lastly, Visa’s (V) “One Card to Rule Them All” solution could pressure PYPL’s tender share, Kennedy added.

Wm. Blair’s Market Perform rating aligns with the SA Quant rating of Hold on the stock and contrasts with the average SA Analyst rating and the average Wall Street rating, both at Buy.

PayPal (PYPL) stock edged down 0.1% in Thursday morning trading.