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BTIG’s Mark Palmer believes the Q3:16 results announcement, scheduled for later in the week, represent an opportunity for Paypal Holdings Inc (NASDAQ: PYPL) to provide more details regarding the financial implications of its recent partnerships with Visa Inc (NYSE: V) and Mastercard Inc (NYSE: MA).
Palmer maintains a Buy rating on PayPal with a price target of $48.
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Investor Concerns
The analyst mentioned that the company’s Q3 results report “represents the latest test of the sustainability of its business model in the face of competitive threats in the payments space,” while also presenting an opportunity for PayPal to update investors regarding the status of the monetization efforts for Venmo.
The Visa Deal
Palmer stated that the Visa partnership was “initially hailed by some as a game changer for PayPal that transformed a tenuous relationship with Visa into a solid one that provided cost certainty, removed the digital wallet fee, and created volume-based discounts while moving the company closer to its goal of ubiquity.”
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However, since PayPal did not reveal any financial details of the deal, investors began to contemplate the negative impact of the company’s transaction margins due to the promotion of Visa as a payment option, while ending the “highly profitable practice” of motivating Visa customers to link that PayPal accounts to their bank accounts via ACH.
The MasterCard Agreement
Following this, PayPal entered into an agreement with MasterCard, and once again, the former company “agreed to halt ACH steering while expanding its presence at the point of sale using MasterCard’s tokenization services.”
Once more, investors grew concerned regarding the margin impact due to increased transaction expenses associated with permitting customers to use their credit or debit cards more easily as payment options.
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New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.