PayPal Holdings Inc (NASDAQ:PYPL) shares climbed today although analysts are beginning to debate the implications from Apple (NASDAQ:AAPL) Pay officially becoming available on the web. Some analysts see Apple Pay’s expansion from devices and apps to the web browser as presenting a serious danger to PayPal, while others say there’s plenty of room in the market for both to thrive.
PayPal endangered by Apple Pay
Piper Jaffray analyst Gene Munster, who has an Underweight rating and $34 per share price target on PayPal, said the company is in serious danger by Apple Pay’s expansion to browsers. He notes that this will make the iPhone maker’s payments platform available on platforms that amount to more than 30% of PayPal’s total purchase volume, including Mac, iPad and iPhone. He believes PayPal shares were unaffected by the announcement because they have been underperforming recently and because Apple management didn’t mention mobile browsers.
Munster sees Apple Pay as being a better mobile payment solution at the point of service, and when it becomes available as an option online, he sees it as a legitimate threat to PayPal’s staying power. He adds that although it hasn’t been confirmed yet, sources said Apple Pay will become available on mobile web browsers very soon as well.
PayPal’s competitors may be able to beat pricing
Perhaps the bigger threat to PayPal is pricing, as Munster states that the competition isn’t looking for direct monetization. He believes this will convert shoppers because their rates may be better than PayPal’s rates with the same high level of security. Further, he said the competition will be able to do all this “without burdening the financial system with fees designed to directly monetize the transaction.”
Pacific Crest Securities analysts Josh Beck and Ankit Kapoor also believe PayPal will have a difficult time competing as they see Apple’s new peer-to-peer payments strategy (also announced at WWDC) as presenting a headwind for its Venmo peer-to-peer payments platform. However, they add that while greater competition might be a headwind to monetization, it might also create opportunity if Venmo partners with Apple.
They also think Apple’s peer-to-peer payment system will be a positive for Square (NYSE:SQ) as the integration with iMessage could greatly increase the number of Square Cash users.
Others see no threat to PayPal
Not all analysts are sounding the death knells on PayPal yet, however, as Wedbush Securities analyst Gil Luria thinks there’s plenty of room in the online payments market for multiple players to thrive. According to The Street, he noted that PayPal has capabilities “on a much bigger scale” as it enables users to pay using any operating system or browser.
He noted that Apple management said that after the expansion, Apple Pay will still only be available on iPad, iPhone and Mac, meaning that other devices and browsers other than Safar aren’t supported. He sees a problem here because it means that both the person who is paying and the person who is receiving the payment may not have an Apple device, and both parties might not. He adds that consumers won’t want to have to think about this.
Luria also pointed out that the digital commerce market is quickly expanding, with Juniper Research pegging it at $4.9 trillion now and rising to $8 trillion in 2020.
PayPal shares climbed by as much as 1.72% to $37.17, while Apple shares (NASDAQ:AAPL) increased by as much as 0.1% to $97.44 during regular trading hours on Tuesday.