Shares of online-payments service PayPal Holdings Inc (NASDAQ:PYPL) remain under pressure despite announcing strong second quarter earnings on July 21. The stock has slumped by more than 4 percent since that date-currently trading at $37.22.
For the quarter, PayPal handed in earnings of $0.27 per share on revenue of $323 million compared with $305 million, or $0.25 a share, a year earlier. The San Jose, California-based company said revenue jumped 15.2% on a year-over-year basis to $2.65 billion, higher than the average analysts’ estimate of $2.6 billion.
PayPal also offered guidance for the third-quarter, saying it expects EPS to be in the range of $0.33 to $0.35, versus consensus of $0.35 per share. The mobile payments company issued revenue projection of $2.62 billion to $2.67 billion, compared to the consensus revenue estimate of $2.62 billion.
The pullback in PayPal shares started right after Wells Fargo & Co (NYSE:WFC) cut its rating on the company’s stock to ‘Market Perform’ from ‘Outperform’ amid concerns a partnership with Visa (NYSE:V) may create interim pressure on funding estimates. Following Wells Fargo’s rating target cut, several analysts questioned the impact on profitability of moving more transactions to Visa’s network, for which PayPal pays fees. PayPal said that while its transaction fees would increase starting next year, it would also begin to unlock more revenue opportunities.
“I truly don’t think any doors have closed, multiple doors opened,” Paypal President and CEO, Dan Schulman was quoted as saying by Dow Jones. Schulman also said that PayPal’s agreement with Visa enhances the company’s capabilities, “offers the potential to establish new contexts for [its] consumers and merchants, and lays the foundation for additional partnerships.”
It is to be noted that despite Schulman’s valid points, investors should also keep in mind Apple’s (NASDAQ:AAPL) Apple Pay service which is becoming larger. Late last month, Piper Jaffray’s Gene Munster warned investors that PayPal could start losing share to Apple’s Pay service this holiday season as the mobile payment platform becomes a serious competitor.
About 43 percent of PayPal’s top merchants will also use browser-based Apple Pay when it launches this fall and when consumers are faced “with identically sized buttons next to each other, we believe Apple Pay [include here factors like convenience and brand recognition] will begin taking share,” the analyst wrote [via AppleInsider] in his note to investors.
Munster has an ‘Underweight’ rating and $34 price target on PayPal stock, implying 10 percent downside.
PayPal Stock Action
Shares of PayPal are up 0.24% at the start of trading on Friday. Shares have advanced 3.06 percent in the last 4 weeks while declining 5.12 percent in the past three months. Over the past five trading sessions the stock has lost 4.78 percent. Shares of PayPal have gained 2.82 percent this year. Since its July 20, 2015 initial public offering priced at about $41 a share, the stock has slumped more than 11 percent as of Thursday’s close.
PayPal’s stock has been forming an intermediate-term range that could resolve to the downside if the equity breaks support and closes below $37.41, its 200-day moving average. The next support level to watch after that is $36. Needless to say, PYPL’s current picture, at least near-term, looks bearish.