Sam Boughedda

Investing.com — PayPal shares dropped 5% Wednesday as Bernstein reduced its price target and rating, stating that the payments giant was at high risk of being overtaken by an upstart.

Harshita Rawat (Bernstein Analyst) has said that she was being downgraded by the company in an investor note on Wednesday. PayPal Holdings Inc Shares to Market Perform from Outperform (NASDAQ:), Setting a price target of $220, down from $260.

Rawat claimed that the pace of change is increasing and PayPal may soon be taken over by a disruptor. 

Three main reasons were cited by the analyst for downgrading. 

First, e-commerce is becoming more consolidated on large platforms like Amazon and Shopify. It is a problem for PayPal, since a substantial portion of its volumes comes from large merchants.

Secondly, the analyst sees slowing share gains because of the growth of trends such as Buy Now Pay Later as well as Apple Pay, Shop Pay, and improving card-on-file/saved card experiences.

Rawat stated, “There is an onslaught rapid innovation by peers like Stripe, Shopify Klarna, Klarna or Affirm.

The analyst stated that PayPal was actively investing in and developing, but it has “more turf” to defend against peers. 

However, Rawat added that “the super app rollout could also surprise positively on engagement & reducing churn,” while the analyst believes the stock will still be affected by online buying activity during the holiday period.