Citi Looks At PayPal Following Apple P2P Report

• Paypal Holdings Inc PYPL shares are down 6 percent since August 12, amid volatility.
• Citi’s Ashwin Shirvaikar maintained a Buy rating on the company, with a price target of $44.
• Apple's possible entry into payments does not pose a "new" threat to PayPal, given the already competitive landscape, Shirvaikar said.

The WSJ reported that Apple Inc. AAPL is in discussions with some US banks to develop a mobile person-to-person, or P2P, payment service, which could be linked to Apple Pay.

Although Apple has not confirmed the news, the development would not be surprising since the company had applied for a patent related to P2P money transfer earlier in 2015, analyst Ashwin Shirvaikar pointed out.

“Based on the information in the article, we would consider Apple, with a history of well-designed products, as a viable competitor in a crowded field. Possible Apple Pay integration could also result in some help to Apple Pay metrics / vice versa,” the analyst wrote.

Other points noted by Shirvaikar were:

1. PayPal strategy highlights that it is crucial to have relations with both merchants and consumers, and “so far only PayPal provide that at global scale – not just in the U.S. but globally.”
2. Venmo has already been scaling its operations for years. It works on both PayPal integration and monetization and would need to scale further by the time Apple launches, possibly by the middle of next year.
3. “No element of payments has ever been a winner-take-all industry. Payments companies compete across segments (wallets, networks, acquirers, issuers, etc.).”

Although Apple’s entry could be a risk factor, it is “hardly a new risk factor” given the competitive landscape in this industry. Shirvaikar added that Apple’s foray is unlikely to alter either “the near-term Venmo growth trajectory or PYPL plans / execution.”