Analyst Optimistic About Paypal Holdings Inc (PYPL) Partnership with Visa


Analyst Gil Luria of Wedbush reiterated his Outperform rating for Paypal Holdings Inc (NASDAQ:PYPL) with a price target of $50, marking a 32% increase from current levels.

After having a call with the former VP of Mobile Payment Solutions at Visa and the former Head of Consumer Products at PayPal the analyst thinks that Paypal will stay the commerce payments leader because of the unprecedented upside its partnership with Visa gives it. According to these former upper-level staffers the partnership will help Paypal’s user experience because of  “access to tokenization, reduced fraud, ability to work with issuers, and access to card art.”

According to TipRanks, Luria has a success rate of 61% with an average return of 4.6% per recommendation.

  • .PayPal/Visa “Partnership”—LOL …

    “The more that users use cards to fund, the less profit that PayPal will make because [credit] cards are most expensive funding source versus ACH and Stored balance. Until now PayPal actively (via marketing and messaging) steered its users away from choosing card funding to ACH, which has helped it sustain a good funding mix and therby a good cost structure. This is good for PP but not good for Visa because they get used less on PayPal and thus lower fees for Visa.

    “Via this deal Visa is influencing PayPal not to steer users away from cards … In return, VISA is offering PayPal to adopt its tokenization which could help PayPal compete more favorably offline (in stores vs online) and thereby compete more effectively with Apple Pay. This also gives PayPal a better cost structure in the offline payment world as the payment will no longer show as “card not present”.

    “So overall this is a bet for PayPal where they are ok to dilute their costs online so capture a bigger share offline, which is still the giants share of the payments world.”—SeekingAlpha.com

    Now, notwithstanding the “spin-off” of PayPal from eBay, eBay and “PreyPal” remain effectively joined at the hip—for at least the next five years—and anyone that thinks otherwise is simply uninformed. The reality is the majority of PayPal’s revenue comes from eBay transactions.

    Any savings that “PreyPal” will now make on their puny number of “offline” transactions will never balance out the higher costs they will now incur on their “online” transactions. So, this “partnership” will not save “PreyPal” as, once the eBay/PayPal exclusivity deal expires—if it ever actually does—MasterPass and Visa Checkout—both online and mobile—will eventually grind the clunky, parasitic, PayPal operation into the dust.

    This “partnership” with Visa is simply the first step in PayPal’s ultimate demise, or, at the very least, its relegation to being the merchant account provider of last resort for only those utterly petty merchants unable to obtain a merchant account with a real bank …