Apple Inc. (AAPL) did not woo investors with any game-changing news on the opening day of its Worldwide Developers Conference (WWDC) on Monday, but the company’s mobile payment service Apple Pay might have some negative impact on market leader PayPal Holdings, Inc. (PYPL).
PayPal Is Not Alone Anymore
At the WWDC, Craig Federighi, Apple’s VP of Software Engineering, announced that Apple Pay will now finally work on websites, a long-awaited feature that gives users the ability to pay for products using their already-stored credit and debit card information on their iPhone or Apple Watch. Customers can now also use their Apple Pay accounts to pay for items within apps, including Best Buy Co., Inc. (BBY) and Starbucks Corporation (SBUX). (See also: Intel Poised to Benefit at Apple’s WWDC.)
Following the announcement, PayPal shares declined slightly by about 0.76%. Pacific Crest analysts published a note Monday, saying, “If Apple Pay were to expand to browsers, it would increase the existing footprint by 40% to 60%.” That would be a drastic increase from current levels of around 11%. “However, we believe the more dominant factor moving forward will be attracting new merchants,” Pacific Crest noted.
That adoption seems like it won’t be a problem for Apple. Ajay Kapur, chief executive officer of Moovweb, which adapts websites for mobile devices, plans to invest $10 million to incorporate Apple Pay into its online software. In an interview with Bloomberg, Kapur said, “Apple Pay for the web is probably the biggest thing in e-commerce technology that I can remember, since e-commerce itself.” Adding, “With a thumbprint, it will be as seamless as buying on Amazon.” (See also: Apple Stock Down 11% So Far This Year.)
To be sure, it will be a while before PayPal feels the impact. Pacific Crest noted that near-term volume growth at PayPal will remain robust, but did note that Apple Pay “could generate mid-term risk.” And the fact that Apple Pay, for now, will only be available when using Apple’s Safari browser will limit the pace at which Apple can catch up to PayPal.
The Bottom Line
AAPL stock closed Monday at $97.34, down 1.51%. The stock has declined 7.52% so far in 2016, compared with a 1.72% rise in the S&P 500 (SPX) index. Over the past twelve months, the shares have declined 23.46%, while the S&P 500 index has declined 0.72%. AAPL stock has a consensus buy rating and an average analyst 12-month price target of $120, implying a rise of 23.28% from current levels.
Originally posted at Investopedia: Apple Pay Takes a Direct Shot at PayPal (AAPL, PYPL)