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PayPal Stock Undercuts Key Levels As Investor Day Fails To Ease Fears

PayPal ( PYPL ) shares fell Thursday, after the digital payments giant’s investor day showcased ambitious plans but failed to alleviate Wall Street’s fears of competition. Management emphasized the breadth of the platform, covering not only the traditional online payment capability but newer technologies at point of sale, ATMs, social media and customized applications for merchants. Executives hope to entice consumers to put more of their spending through PayPal by offering budgeting and money-management capabilities, while enticing merchants with the PayPal Credit offering. The OneTouch payment app has also taken off as a response to the increasing number of purchases made over mobile phones. Management also discussed the rise of “contextual commerce,” the trend toward technologies predicting consumer buying habits and bringing products to the consumer rather than the consumer going out and seeking them. Repeatedly, they pointed to the sheer size of PayPal’s network, after 17 years of existence, as bringing a key advantage over competing platforms in penetrating these new markets. However, Pacific Crest analyst Josh Beck wasn’t so sure. “PayPal highlighted a dramatic shift in commerce, underscored by diverging performance at Target ( TGT ) and Amazon ( AMZN ), which creates opportunity and risk,” Beck wrote in a research note. “Whether PayPal will be able to retain its competitive moat as Apple ( AAPL ), Amazon, Stripe and Visa ( V ) focus on mobile and contextual commerce remains unclear to us.” Beck retained a sector weight rating on PayPal stock. Margins Remain A Concern Management affirmed previous financial guidance, including that profit margins will be “stable to up.” Pretax margins took a definite hit last year as the company has invested in new projects, such as the recently acquired financial-remittance company Xoom. “While we believe management did an exceptional job explaining Paypal’s differentiation (serving both consumers and merchants; expanding relevance by providing solutions from Braintree, Paydiant, PayPal, Xoom and Credit), an intensifying competitive landscape, combined with the company’s margin outlook remain our biggest concerns,” wrote Sterne Agee CRT analyst Moshe Katri in a research note affirming his neutral rating. Credit Suisse analyst Paul Condra, who holds a buy rating on the stock, emphasized the positive. “Our conviction on the stock was strengthened from (1) commentary that the credit business is not more than high single digits percent of profit (well below speculation of around 25%) and will likely not grow beyond 2% to 3% of payment volume; and (2) increased visibility on growth outlook as management expects to double payment volume in four years, implying 20% total payment volume growth through 2019,” Condra wrote. PayPal stock fell 3.4% to 37.65 on the stock market today . It was seventh straight decline for the stock, which is now below entry points at 40.03 and 38.62. Apple stock fell 0.4% Thursday, while Visa dipped 0.7% and Amazon climbed 0.15%. RELATED: Apple Pay Rival MCX, Visa Loom At PayPal Analyst Day

Wireless Firms Act As Utilities; Other Techs Exit Top Rankings

The market faces no shortage of challenges: a buildup of distribution days, the S&P 500 settling back into negative territory for the year, and the Nasdaq diving below support at its converged 50- and 200-day moving averages. Those technical challenges are being underscored by another development: a vacuum of leadership among technology industries. Tech industry groups have entirely exited the top 20 of IBD’s 197 group rankings, with the exception of two: wireless and integrated telecom services. The wireless services group includes major mobile phone carriers Sprint ( S ) and T-Mobile U.S. ( TMUS ). The integrated group is dominated by AT&T ( T ) and Verizon ( VZ ). Investigate this tech stock that broke out of a base in heavy trade on Thursday using IBD’s Stock Checkup feature. Wireless services and networks are clearly high-tech territory. But as more consumers abandon their landlines and rely strictly on wireless services, and as more young people spend a growing share of their lives via smartphones, the wireless stocks also increasingly present the stability associated with utility stocks. In that respect, they represent a defensive hedge for funds and other large investors as indexes weaken. This could help explain why both of the telecom groups rose into the top 20 rankings as the broad market pulled back over the past four weeks. The S&P 500 has backed off 3.7% from its mid-April high. The tech-heavier Nasdaq peeled back 5.3% during the same period. Even 13 weeks ago, when defensive groups such as utilities, bond funds and tobacco crowded the leading ranks, tech groups including Internet content providers, chip equipment makers and solar energy manufacturers held in the top 20 rankings. Instead of continuing to lead the market, those three groups have since fallen to rankings of No. 85, No. 110 and No. 169, respectively. Beyond the top 20 rankings, medical systems manufacturers rank a strong No. 23. The technology-driven group counts Intuitive Surgical ( ISRG ) and Idexx Laboratories ( IDXX ) among its bulwarks. The next tech group bearing some potential growth stocks is the scientific electronic equipment group, ranked No. 41 Thursday. Danaher ( DHR ) and Agilent ( A ) are the strong suits here. The only other tech group in IBD’s top 50 rankings is the foreign telecom services industry, led by China Mobile ( CHL ), Japan’s Nippon Telephone & Telegraph ( NTT ) and London-based Vodafone Group ( VOD ). What about the big-charisma tech names? Apple ( AAPL ) is down 16% from its mid-April high. Alphabet ( GOOGL ) is down 10% and fighting for support at its 200-day line. Facebook ( FB ) is down only 3%, but has erased all gains from its April 28 breakout. A number of other stocks in the group are also keeping their heads up as the market pulls back. Look at WebMD Health ( WBMD ) and Zillow ( Z ), just to name a couple. Sell-offs among China-based plays, including Baidu ( BIDU ), YY Inc. ( YY ) and Momo ( MOMO ) have helped pressure the Internet content group to a No. 167 ranking. Amazon.com’s ( AMZN ) chart remains durable, extended above a buy point. Also in the Internet retailers group, Argentina’s MercadoLibre ( MELI ) is in buy range from a 127.87 buy point, although its fundamentals continue to lag. But sell-offs in the group — particularly among China-based Internet plays including JD.com ( JD ), 58.com ( WUBA ) and Vipshop Holding ( VIPS ) — have helped hold the group to a weak No. 104 ranking.

Applied Materials Q3 Guidance Tops By $300 Mil After Narrow Q2 Beat

No. 2 chip-gear maker Applied Materials ( AMAT ) toasted Wall Street’s current-quarter guidance expectations late Thursday and reported in-line Q2 metrics, prompting shares to rise in after-hours trading. Late Thursday, Applied Materials stock was up more than 4% in after-hours trading Thursday, after the company posted its Q2 earnings results. Shares closed down a penny in the regular session in the stock market today , at 19.91. Top rival ASML ( ASML ) stock fell 1.3% Thursday. Soon-to-merger KLA-Tencor ( KLAC ) and Lam Research ( LRCX ) stocks split the difference, down and up less than 1% each in the regular session. IBD’s 34-company Electronic Semiconductor-Manufacturing industry group fell nearly 1%. For the quarter ended May 1, Applied Materials reported $2.45 billion in sales and 34 cents earnings per share ex items, flat and up 17%, respectively, vs. the year-earlier quarter. Sales edged analyst views for $2.43 billion and EPS beat the consensus for 32 cents. Three months ago, Applied Materials guided to a 5%-10% sequential increase in sales, implying $2.37 billion to $2.48 billion, and 30-34 cents. Applied Materials guided to a 14%-18% quarter-over-quarter jump in current-quarter sales, implying $2.79 billion to $2.89 billion and topping the consensus of 22 analysts polled by Thomson Reuters for $2.51 billion. Sales would be up 14% vs. the year-ago quarter. EPS minus items guidance for 46-50 cents was a dime above Wall Street at the low point, and would be up 45.5%.