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PayPal Stock Slides As Investor Day Leaves Analysts With Questions

Digital payments giant PayPal ( PYPL ) was down midday Thursday, after its investor day showcased its ambitious plans but failed to alleviate Wall Street’s fears of competition. Management emphasized the breadth of the platform, covering not only the traditional online payment capability but newer technologies at point of sale, ATMs, social media and customized applications for merchants. Executives hope to entice consumers to put more of their spending through PayPal by offering budgeting and money-management capabilities, while enticing merchants with the PayPal Credit offering. The OneTouch payment app has also taken off as a response to the increasing number of purchases made over mobile phones. Management also discussed the rise of “contextual commerce,” the trend toward technologies predicting consumer buying habits and bringing products to the consumer rather than the consumer going out and seeking them. Repeatedly, they pointed to the sheer size of PayPal’s network, after 17 years of existence, as bringing a key advantage over competing platforms in penetrating these new markets. However, Pacific Crest analyst Josh Beck wasn’t so sure. “PayPal highlighted a dramatic shift in commerce, underscored by diverging performance at Target ( TGT ) and Amazon ( AMZN ), which creates opportunity and risk,” Beck wrote in a research note. “Whether PayPal will be able to retain its competitive moat as Apple ( AAPL ), Amazon, Stripe and Visa ( V ) focus on mobile and contextual commerce remains unclear to us.” Beck retained a sector weight rating on PayPal stock. Margins Remain A Concern Management affirmed previous financial guidance, including that profit margins will be “stable to up.” Pretax margins took a definite hit last year as the company has invested in new projects, such as the recently acquired financial-remittance company Xoom. “While we believe management did an exceptional job explaining Paypal’s differentiation (serving both consumers and merchants; expanding relevance by providing solutions from Braintree, Paydiant, PayPal, Xoom and Credit), an intensifying competitive landscape, combined with the company’s margin outlook remain our biggest concerns,” wrote Sterne Agee CRT analyst Moshe Katri in a research note affirming his neutral rating. Credit Suisse analyst Paul Condra, who holds a buy rating on the stock, emphasized the positive. “Our conviction on the stock was strengthened from (1) commentary that the credit business is not more than high single digits percent of profit (well below speculation of around 25%) and will likely not grow beyond 2% to 3% of payment volume; and (2) increased visibility on growth outlook as management expects to double payment volume in four years, implying 20% total payment volume growth through 2019,” Condra wrote. PayPal stock was down nearly 3.5% in midday trading on the stock market today , near 37.50. The stock holds a good IBD Composite Rating of 88 but its Accumulation/Distribution Rating has been deteriorating lately, to a grade of D+, indicating more institutions are selling than buying. RELATED: Apple Pay Rival MCX, Visa Loom At PayPal Analyst Day

Apple Pay Rival MCX, Visa Loom At PayPal Analyst Day

Delays and staff cuts at Merchant Customer Exchange (MCX), a mobile payments consortium, will likely boost Apple Pay, while PayPal ( PYPL ) management’s view on MCX’s woes should be a hot topic at PayPal’s analyst day on Wednesday. MCX said Tuesday it will cut 30 jobs and again delay the launch of its mobile app , a potential rival of Apple ( AAPL ) Pay and others. MCX has been courting retailers, Apple, Alphabet ’s ( GOOGL ) Google, PayPal, Samsung, Visa ( V ) and others in the mobile payments space. Wal-Mart ( WMT ) has been MCX’s main backer. PayPal will be hosting its first analyst day following its 2015 spinoff from eBay ( EBAY ) last year. The event will be held in San Jose, Calif. PayPal recently launched its redesigned mobile app, which works on Apple iPhones and Android-based devices, in 145 countries. While Apple and MCX were rivals, PayPal has aimed to partner with different players in mobile payments. PayPal in March 2015 acquired Paydiant, which had close ties to MCX and retailers. MCX had aimed to reduce the clout of credit card firms in the nascent mobile payments business, analysts say. Prior to the latest MCX announcement, Citigroup analyst Ashwin Shirvaikar said in a research report that PayPal’s relationship with Visa and MasterCard ( MA ) was one area of interest heading into its analyst day. At Jefferies, analyst Jason Kupferberg was also hoping for an update on Visa. “PayPal’s relationship with Visa remains a topic of interest for the Street, but we wouldn’t be surprised if there is limited commentary at the analyst day on this topic, given ongoing negotiations,” Kupferberg wrote in a report. Prior to the eBay spinoff, PayPal acquired Braintree, a mobile payment service, and Venmo, a hybrid mobile payment app and social network for millennials. Daniel Perlin, an analyst at RBC Capital, expects mobile to be a big theme at PayPal’s analyst day. “We believe management will outline its plans to shift from its legacy e-commerce platform into a leading mobile-first platform for payments, with its Braintree asset being front and center.”

Analysts Split On Square As Dorsey Remains Split Between Twitter

Loading the player… Payment processor Square ( SQ ) is crashing after its quarterly adjusted loss was wider than expected, reigniting questions about Jack Dorsey’s ability to lead two companies at the same time. Wedbush on Friday downgraded the stock to underperform and cut its price target to 9 from 11. The analyst projects that the company’s growth will decelerate over the next two years amid more competition and market saturation. Meanwhile, Goldman Sachs believes Square is still a buy despite the pullback, saying that “continued fundamental momentum should drive the stock to recovery as the company executes.” Shares are gapping down 20% in giant volume, hitting a more than two-month low. Square initially broke out of an IPO base in late March, and drifted in and out of buy range for a month before turning lower and breaching its 50-day line in Thursday’s session. Square is now more than 30% below its all-time high. Between this disappointing report and Twitter’s ( TWTR ) last week, CEO Jack Dorsey has his work cut out for him. Twitter is trading at all-time lows and is more than 60% below its 52-week peak, but edged up 0.7% Friday. Meanwhile, Square peer PayPal ( PYPL ) is retaking its 50-day line in quick trade, up 0.9% intraday. PayPal shares are trading 7% below its all-time high reached on its first day of trade after its split from eBay ( EBAY ). Elsewhere in the payment space, Visa ( V ) is trading around sell territory after an attempted breakout past a cup base failed. Visa was essentially flat by early afternoon. And MasterCard ( MA ) is trading just below buy range from a cup-with-handle base with a 96.21 buy point it initially broke out of less than a month ago. MasterCard was also little changed by the afternoon.