Apple's deployment of its new digital wallet, or mobile payment service, is still a month away, but it's already having negative implications on competitors.
EBay shares took a hit Wednesday after Piper Jaffray downgraded the e-commerce site to "neutral" from "overweight" and lowered their price target to $55 per share. The firm cited Apple's new platform as the reason, saying it could disrupt eBay's core PayPal business.
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"We believe the unknown competitive threat of Apple Pay will further weigh on eBay's multiple over the next three to six months," wrote the firm's senior research analyst Gene Munster. "We expect that investors will begin to question PayPal's longer-term role in offline payments and may question the staying power of online payments."
But according to some, Apple Pay only adds to the exiting worries over eBay and PayPal. "There have already been concerns about PayPal after the departure of [former PayPal president] David Marcus in June," said S&P Capital IQ's equity chief investment officer Erin Gibbs. "The company is also facing increased global competition and concerns on state sales taxes."
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Gibbs described Apple's mobile payment service as a significant threat to eBay when considering the magnitude of PayPal in its core business. "As of last quarter, PayPal was 45 percent of revenues and almost 40 percent of operating profits. Really all of the growth is coming from this payment business," she added. "If the PayPal business sees a decline or even stabilization eBay's valuation would need to be dramatically re-evaluated."
Based solely on the technicals, Prime Execution's Steven Pytlar agreed the stock is in trouble. "The charts for eBay do not bode for a lot of confidence."
Pytlar added that the stock has been stuck in a sideways range for much of the past two years, a clear indication that investors are wary about the company.
Of the recent price action, Pytlar said, "we see the stock plunging toward the lower-bound of this long multiyear sideways consolidation range. If we fall below this support level [of $49.81 per share], it can really signal heavy selling pressure and there could be considerable downside."