Guggenheim: Stripe, Amazon Pay Present Growing Challenge To PayPal

Stripe is a private company that offers merchants the ability to accept credit, debit and other payment methods on their online stores. The company is reportedly worth $20 billion based on a recent round of financing — and a growing competitor to Paypal Holdings Inc (NASDAQ: PYPL), according to Guggenheim.

The Analyst

Guggenheim's Jeff Cantwell maintains a Neutral rating on PayPal.

Stripe Vs. Paypal

Data collected by the research firm shows Stripe has grown its merchant base at 20 times the rate of PayPal's over the past three years, Cantwell said in a Monday note.

Part of this can be attributed to PayPal's first-mover advantage and the "law of large numbers," but merchants are attracted to Stripe's highly customizable and competitively priced platform that offers non-payment related services, the analyst said. 

Data also shows Stripe merchants account for around one-third the number of PayPal's merchants, which represents an increase of fivefold from three years ago, Cantwell said.

PayPal remains the clear market leader, but Stripe is "narrowing that gap pretty quickly," since it offers the ability to accept other, non-PayPal payment methods, the analyst said. 

Amazon Pay Vs. Paypal

Amazon.com, Inc. (NASDAQ: AMZN)'s payment processor Amazon Pay is also gaining traction against PayPal, Cantwell said.

The number of merchants accepting Amazon Pay has risen from nearly zero five years ago to about 4 percent of the number of PayPal merchants today, he said.

Granted, "4 percent is still only 4 percent at the end of the day," but Amazon is likely to focus on how it can branch out of its own platform to serve more customers, the analyst said. Given Amazon's top ranking in customer satisfaction, the inclusion of Amazon Pay on non-Amazon merchant platforms could gain traction with consumers over the long-term, he said. 

Price Action

PayPal shares were up 0.68 percent at $96.63 at the time of publication Monday; Amazon shares were 0.33-percent higher at $1,636.91. 

Related Links: 

Cramer Explains How The 'Little Guy' Benefits From Shopify, Square 

Guggenheim Downgrades PayPal On Likely Headwinds From Brexit, Payments Competition 

Photo courtesy of Venmo.