Recent developments in the payments industry highlight the competitive intensity affecting PayPal Holdings Inc (NASDAQ:PYPL) said Bank of America.
The bank, in a note where it maintained a 'neutral' rating on the stock and a price objective of $74 versus the last close at $64.77, cited recent industry announcements that "illustrated ongoing competitive intensity" faced by the San Jose, California company.
Apple Inc (NASDAQ:AAPL, ETR:APC), for instance, introduced a new "Tap to Cash" service, allowing Apple Cash users to pay each other by tapping their iPhones or Apple Watches together. This service, available with iOS18 and WatchOS11, is seen as a direct competitor to Venmo.
Mastercard also announced that by 2030, all its European card credentials will be tokenized, enhancing security for online transactions. This move could impact PayPal's core checkout services, including its new Fastlane service.
Additionally, Affirm's payment products will be available to Apple Pay users in the US later this year. This partnership could strengthen Affirm's position in the buy now pay later (BNPL) market, where PayPal also competes.
On the plus side, Bank of America notes that PayPal's new leadership is making "sensible strategic moves", in terms of new product rollout and organizational realignment.
While the company reported that the second quarter is tracking ahead of plan for transaction profit, operating expenditure and EPS, the competitive landscape remains challenging.
"PYPL continues to operate in a highly dynamic and complex competitive landscape, which could ultimately impede the magnitude of top-line re-acceleration needed to catalyze significant multiple expansion."
Bank of America views 2024 as a "transition year" for PayPal, with the risk/reward profile "relatively balanced" at 14 times 2025 forecast underlying earnings.