On Tuesday, Jefferies reiterated a Hold rating on PayPal shares (NASDAQ:PYPL), maintaining a price target of $65.00. The firm highlighted PayPal's announcement of an expanded partnership with Adyen (AS:ADYEN) to provide Fastlane to enterprise and marketplace customers in the United States.
This collaboration builds on Adyen's existing distribution of PayPal-branded checkout, Venmo, and PayPal's Buy Now, Pay Later (BNPL) services.
The analyst at Jefferies noted that while the partnership with Adyen is not expected to have a significant financial impact on PayPal's net take rate, it holds value in its potential to widen distribution and boost consumer adoption. The collaboration is seen as a strategic move to increase consumer awareness and use of PayPal's services.
The primary focus for PayPal with the introduction of Fastlane is to achieve widespread distribution, which is expected to lead to an increase in consumer usage.
The company aims to show a significant improvement in conversion rates compared to guest checkout, which could result in higher merchant adoption and potentially justify premium pricing in the future. This could be achieved either as a standalone service or as part of an unbranded bundle with Braintree and PayPal Commerce Platform (PPCP).
Jefferies anticipates that the net take rate for PayPal on Fastlane transactions processed through Adyen will be minimal, less than 15 basis points (bps), suggesting that the gross profit contribution from this partnership will be insignificant.
The analyst views the Adyen partnership as a step towards achieving PayPal's first two objectives of distribution and consumer adoption, rather than a major contributor to gross profit.
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