Investing.com -- Shares in PayPal (NASDAQ:PYPL) dipped on Tuesday after analysts at Mizuho cut their rating of the fintech group to "neutral" from "buy," citing concerns that market share may be waning due to fierce competition from Apple's (NASDAQ:AAPL) mobile payment platform.
The analysts flagged that this service -- known as Apple Pay -- is the biggest threat to PayPal's branded products, saying that it is driving a change in consumer checkout habits largely thanks to its presence on Apple's megapopular iPhone smart device.
"The iPhone has forced a shift from desktop (where [PayPal] has historically performed well) to mobile (where Apple is most prevalent and where [PayPal]'s checkout trends are weaker [versus] desktop)," the Mizuho analysts wrote.
They added that worries remain over an "emerging age demographic problem," noting that tech-savvy young consumers in the U.S. are tending to use newer payment methods like Apple Pay and "buy now, pay later" short-term financing. PayPal, they argued, is still a "laggard in this respect".
Citing an internal study, the Mizuho analysts said that 31% of shoppers who prefer Apple Pay are aged 18-29, compared to 18% of PayPal users in that cohort. Meanwhile, just 29% of Apple Pay customers are aged 45 years or older versus nearly 50% of PayPal users.
"[T]his signals that each incremental consumer that enters the e-comm[erce] checkout market is much more likely to choose Apple Pay over [PayPal]," the analysts claimed.
In response to the growing competition and margin pressures, California-based PayPal has recently moved to develop new revenue sources outside of solely transaction-based volumes. Chief Executive Alex Chriss said in November that the firm is working on a comprehensive plan for its 2024 fiscal year, including "opportunities to accelerate our revenue growth while reducing our expenses."