Venmo isn't likely to be a 'game changer' for PayPal, says Bernstein

Bernstein analyst Harshita Rawat on Tuesday reiterated her view that Venmo isn't likely to be a complete "game charger" for parent PayPal Holdings Inc. and that effectively monetizing the popular peer-to-peer service is a three-year to five-year opportunity for PayPal. "On one hand, Venmo appears to be a 'gold mine' with its highly engaged, loyal, younger and affluent user base," Rawat wrote. "On the other hand, there is a lot of uncertainty around the timing (2019 or 2022 event?) and magnitude ('game-changer' or just 'nice-to-have'?) of impact." Her recent survey of Venmo users found interest in the company's various monetization levers, including instant access to funds, a Venmo debit card, and the use of Venmo for in-store purchases. Still, she wrote that "it also doesn't help that Venmo is currently losing money so making Venmo revenue generative is important as PayPal weathers other EPS headwinds such as the credit divestiture, eBay roll-off, [foreign exchange] & lapping of strong cross-border." Rawat rates the stock at market perform. PayPal shares are up 36% over the past 12 months, while the S&P 500 has gained 16%.

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