Paypal's Long-Term Story Remains In Place Despite eBay Split, Says William Blair

EBay Inc EBAY may have overshadowed Paypal Holdings Inc PYPL's fourth-quarter report, but one Wall Street analyst says the long-term PayPal story is still on track.

The Analyst

William Blair analyst Robert Napoli reiterated an Outperform rating for PayPal stock.

The Thesis

It’s no surprise that PayPal is selling off after eBay announced it would be dumping PayPal as a core processor starting in 2020, Napoli said. But while losing eBay is certainly a setback, PayPal will be just fine, the analyst said. 

“We believe PayPal’s familiarity with consumers, brand, scale, global presence and technology represent competitive advantages over most current competitors and new entrants not only in the United States, but in many markets around the globe."

PayPal will remain among the payment options offered to eBay customers, Napoli said. While eBay accounted for 29 percent of total PayPal revenue in 2014, that number steadily declined to just 22 percent in 2016. Napoli estimates it will hit 6 percent by 2021.

PayPal’s eBay revenue has grown in only the mid-single-digits, while non-eBay revenue has growth by an average of 24 percent, the analyst said. PayPal’s eBay processing business represents less than half of its total eBay revenue and is a lower-margin business than its branded checkout service, he said. 

The end of the eBay relationship allows PayPal to potentially work with other leading e-commerce companies that it was prevented from working with under the current agreement, according to William Blair. 

Price Action

PayPal stock was down by 8.43 percent at $78.13 at the time of publication Thursday morning. 

Related Links:

Bernstein: 10 Disruptive Forces In Payments For 2018

Apple Pay Now More Widely Accepted Than PayPal

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorReiterationAnalyst Ratingse-commercePayment ProcessorsRobert NapoliWilliam Blair
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!