On PayPal’s (NASDAQ:PYPL) recent Q3 earnings call, new CEO Alex Chriss said a priority for the digital payments leader was to enhance the appeal of its Branded Checkout for consumers and at the same time improve the checkout process for merchants.
Well, going by the latest data Mizuho analyst Dan Dolev has been sifting through, Chriss might need to get to work pronto on making it more appealing.
Using the web traffic data at 25 of PayPal’s largest e-commerce checkout partners (such as Etsy, Nike, Home Depot, and Temu), Dolev’s analysis indicates that market share trends have remained under pressure recently. “Our e-comm checkout tracker suggests that Apple Pay continued weighing on Branded Checkout share in October, as outgoing web traffic from key merchants remains lower vs. historical levels,” Dolev explained.
That’s not the only issue. The rising popularity in the US of Chinese online marketplace Temu has been beneficial to PayPal and was a positive catalyst in Q3. In fact, international volumes exhibited a healthy increase in the quarter with FXN TPV (total payment volume) growth of 19%, representing a 500bps acceleration from Q2. However, in October, PayPal’s web traffic share from Temu appears “more muted,” with Dolev’s noting that traffic from Temu to PayPal slowed down. On the other hand, total site visits to Temu continued to exhibit overall growth.
As such, with the shift away from Branded Checkout potentially resulting in lower transaction take rates, Dolev has lowered his revenue and EPS estimates a touch for 2024 and 2025.
However, that does not mean the future looks bleak for the company. “We remain upbeat about PYPL’s future growth prospects given ample opportunities to combine the PayPal & Venmo platforms & create a global digital wallet,” Dolev said. “We are convinced that such measures could soothe concerns about market share losses to Apple Pay.”
All told, Dolev reiterated a Buy rating although he lowers his price target from $92 to $72, now implying growth of 27% for the coming year. (To watch Dolev’s track record, click here)
Amongst Dolev’s colleagues, 21 other analysts join him in the bull camp and with an additional 11 skeptics, the stock claims a Moderate Buy consensus rating. The average target is higher than Dolev will now permit and at $84.17 suggests shares will climb ~49% higher over the one-year timeframe. (See PayPal stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
