PayPal (PYPL) Is Losing Its Edge - PiperJaffray

Piper Jaffray analyst, Gene Munster, investigated available digital payment solutions and walked away believing that converging functionality by card networks (V, MA, AXP) and mobile OS/hardware providers (AAPL, GOOG, Samsung) will reduce PayPal's (NASDAQ: PYPL) product differentiation. Over time, limited differentiation could impact PayPal's transaction margins. While past attempts by certain players to compete with PayPal have been unfruitful, he believes that mobile is offering a conduit for competitors to acquire users at relatively low cost.

PayPal has prided itself on its ability to securely enable transactions, we note that an increasing number of financial and technology competitors have or seek to have products enabling similar functionality to consumers, but few seek transaction profitability as their core objective.

Offerings from Visa, MasterCard and American Express are enabling faster checkouts online while retaining rewards acceptance; we believe Android Pay, Apple Pay and Samsung Pay are gaining/will gain traction at point of sale, generating an active user base that will at some point transition to mobile web payments and, eventually, to desktop payments.

Upcoming catalysts include WWDC (Apple), F8 (Facebook) and Android Pay product rollouts, and Samsung's desire to enter into mobile web payments.

No change to Underweight rating or $33 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 $33.61 yesterday.

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