PayPal's (PYPL) Elevated Debit Card Fees are at Risk - Morgan Stanley

August 3, 2021 7:21 AM EDT
Get Alerts PYPL Hot Sheet
Price: $279.61 +2.67%

Rating Summary:
    47 Buy, 7 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 16 | Down: 13 | New: 52
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Morgan Stanley analyst James Faucette reiterated an Overweight rating and $340.00 price target on PayPal (NASDAQ: PYPL) after the company's 10-Q revealed the SEC is investigating PYPL's debit practices under provisions within the Durbin Amendment that allow it to partner with smaller banks (less than $10B in assets) that can charge higher swipe fees vs. larger institutions for debit purchases.

The analyst stated "The SEC's investigation of PYPL denotes risk to revenue streams generated from high debit card fees, and we have long-expected that credit will be the more durable revenue source." He went on to state "We think the probe highlights risk that debit card fees for PYPL and peers like SQ may come down, as well as the need for fintechs to drive more credit-related revenues, which we expect to be more sustainable. PYPL and SQ share interchange fees with their bank partners, but on average, smaller issuers receive 1.18% of the transaction value as debit interchange, while larger banks get on average 0.56% (Federal Reserve, 2019)."

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 $270.99 yesterday.

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