Morgan Stanley: Paypal Is Dominating Bitcoin, Other Digital Wallets

Plenty of investors looking for industries ripe for disruption have focused on the payments business, but the latest data from Morgan Stanley suggests some digital payment options are gaining traction when it comes to mainstream adoption, while others are taking a step backward.

Gold Standard

Morgan Stanley analyst James Faucette released a new report indicating Paypal Holdings Inc PYPL is the gold standard of mainstream digital payments. According to Faucette, Paypal is now accepted by 82 percent of the top 500 U.S. internet retailers, up from 81 percent last quarter.

Paypal’s closest digital wallet rival, Amazon.com, Inc. AMZN, saw the acceptance rate of its Amazon Pay service fall slightly from 13 percent last quarter to just 12 percent today. Visa, Inc. V wallet Visa Checkout gained zero net new merchants in the quarter, and its acceptance rate remains at 9 percent. Mastercard Inc MA gained one net merchant in the quarter to bring its acceptance rate to 6 percent.

On the cryptocurrency front, Faucette said bitcoin once again failed to add a single new merchant for the fifth consecutive quarter. Bitcoin’s acceptance rate among the top 500 U.S. retail merchants remains under 1 percent.

Room For Upside

The latest numbers from Morgan Stanley suggest PayPal is the clear market leader in U.S. digital wallets.

“While PYPL has held up relatively well vs. Payments peers the last couple of months, we still see room for upside to the stock,given PYPL's high revenue growth, largely discretionary opex,and compounding earnings profile,” Faucette wrote.

Morgan Stanley has an Overweight rating and $99 price target for Paypal.

Paypal's stock traded at $90.29 per share Thursday morning.

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