Piper Jaffray Sees Significant Challenges for PayPal (PYPL)

Piper Jaffray analyst, Gene Munster, sees significant challenges for PayPal (NASDAQ: PYPL) monetizing Venmo given 1) numerous competitive and free P2P options, 2) low interest rates hindering float income, 3) limited PayPal in-store merchant acceptance, and 4) an uncertain value proposition for consumers and merchants.

PayPal will begin trials with pay-by-Venmo at select merchants with a more robust roll-out during ’16, creating another mobile payment option for consumers.However, the mobile payment/wallet landscape is becoming an increasingly crowded playing field with options including Apple Pay, Samsung Pay, Android Pay, Chase Pay, Google Wallet, MCX/ CurrentC and PayPal. Add in legacy players like Visa Checkout, MasterCard Masterpass, and AMEX Express Checkout, and real estate for all logos at the point-of-sale will be scarce and cluttered.

Currently, Venmo is free for P2P payments to friends/family if the transaction is funded via bank account or debit card. While Venmo has gained significant traction amongst the millennial demographic in the U.S., there are many P2P money transfer players in the industry that could challenge Venmo’s user base and maintain pressure to keep P2P transactions amongst friends and family free. Competitors stretch across social media platforms (Facebook, Google, Snapchat), large banking institutions (clearXchange processing Chase and Wells Fargo) and other payments companies (Fiserv, Square, Dwolla) demonstrating the audience that P2P payments engages

No change to Underweight rating or $30 PT.

For an analyst ratings summary and ratings history on PayPal click here. For more ratings news on PayPal click here.

Shares of PayPal closed at $36.33 yesterday.

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