PayPal Stock Drops as Amazon Ends Venmo Payment Option

PayPal Holdings stock experienced a decline following Amazon.com's announcement that it would no longer support the use of Venmo as a payment method for Prime users.

Venmo, a subsidiary of PayPal, revealed that Amazon users will no longer be able to add Venmo as a payment option. However, those who currently have Venmo enabled will be able to continue using it until January 10.

According to Amazon, starting from January 10, 2024, Venmo will not be accepted on their website or mobile app. Nevertheless, customers can still choose from a variety of other payment options, such as debit cards, credit cards, checking accounts, or installments.

The news about Amazon discontinuing Venmo integration has fueled speculation among analysts. Evercore ISI analyst David Togut believes this decision is a reflection of the lack of consumer adoption for Pay with Venmo as their preferred checkout method.

PayPal has been actively pursuing partnerships with various online retailers, including Uber Technologies and Abercrombie & Fitch. However, Togut expressed concerns about this recent development potentially impacting PayPal's ability to monetize on these platforms.

Initial analysis from October 2022 suggested that PayPal's earnings per share would not be affected if 2.5% of Amazon's gross merchandise value came from Pay with Venmo transactions. However, considering the current situation, Togut expects the volume of Amazon sales using Pay with Venmo to be significantly lower than 2.5%, thus having no material impact on future estimates.

The collaboration between PayPal and Amazon was initially launched in October 2022, aiming to integrate Venmo into Amazon's payment options.

Venmo confirmed its strong relationship with Amazon and assured customers that they can still add their Venmo debit or credit cards to their Amazon wallet for payments. They expressed enthusiasm for further building on their partnership.

As a result of this announcement, PayPal stock experienced a decline of 1.3% on Thursday, closing at $58.76. Year-to-date, the stock has faced a decrease of 17%.