PayPal Stock ‘at Risk of Being Disrupted’ Says Bernstein

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Investing.com — PayPal shares fell 5% on Wednesday after Bernstein cut its rating and price target, saying the payments giant is at risk of being disrupted by an upstart.

In a note to investors on Wednesday, Bernstein analyst Harshita Rawat downgraded PayPal Holdings Inc (NASDAQ:PYPL) shares to market perform from outperform, setting a price target of $220, down from $260.

Rawat said change is hastening, and PayPal is now at risk of being disrupted by a disruptor itself. 

The analyst cited three main reasons for the downgrade. 

The first reason is the increasing aggregation of e-commerce within large platforms such as Amazon and Shopify. This is an issue for the company, with a significant share of PayPal’s volumes coming from larger merchants.

Secondly, the analyst sees slowing share gains because of the growth of trends such as Buy Now Pay Later as well as Apple Pay, Shop Pay, and improving card-on-file/saved card experiences.

Finally, Rawat said there is a well-funded onslaught of rapid innovation from peers such as Stripe, Shopify, Klarna, Affirm, and SQ.

“While PayPal is actively investing and evolving, it simply has more turf to defend vs. peers in our view,” the analyst explained. 

However, Rawat added that “the super app rollout could also surprise positively on engagement & reducing churn,” while the analyst believes the stock will still be affected by online buying activity during the holiday period.