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Morgan Stanley analysts said in a research note on Wednesday that Apple’s (NASDAQ:AAPL) Apple Pay shouldn’t impact PayPal’s (NASDAQ:PYPL) growth in the medium term.
Even so, the analysts, who have an Overweight rating and a $136 price target on PayPal, said Apple Pay has unique advantages in tech, demographics, and retention that creates a long-term to-do list for PayPal.
“Apple Pay is the talk of PayPal’s town. We’ve heard growing market concern around the threat from Apple Pay to PayPal’s leadership in online payments,” wrote analysts. “Apple Pay is growing quickly and has a unique set of advantages, but we don’t think PayPal’s own growth has been impacted to date, and its ability to grow above overall eCommerce should remain intact based on several factors.”
The analysts also explain how PayPal is maintaining a significant lead in acceptance and has consumer preference.
“PayPal has a major lead in online merchant acceptance as it’s on 83% of the top 500 websites and continues to increase its presence. While our proprietary assessment of Apple Pay’s share is higher than we initially thought at 48% of the top 100, Apple Pay has lower penetration among the largest retailers and is only available on Apple devices, which creates an inconsistency that we estimate means consumers only see Apple Pay as a checkout option ~20-25% of the time,” the analysts revealed.
They go on to state that PayPal leads in consumer choice, with 63% of the firm’s 2,000 U.S. survey respondents using it compared to 24% for Apple Pay.
“When it comes to transacting in different eCommerce verticals, PayPal outpaces competitors across channels (grocery, retail, travel, etc) and is usually second to credit/debit.”
