PayPal faces escalating competition
In the past year, we’ve seen PayPal (PYPL) make a series of strategic acquisitions in apparent attempts to sharpen its competitive edge amid escalating competition in the digital payments space. With eBay (EBAY) dropping PayPal as its primary payment processor, Square (SQ) expanding into consumer lending, and Amazon (AMZN) exploring a broader rollout of its Amazon Pay service, PayPal remains under intense competitive pressure and may need to find new ways to counter the threats.
Innovation has always been a viable path for savvy companies to counter competitive threats and create new revenue sources to drive growth. Therefore, innovation is an area in which PayPal may want to invest significantly as it works to repel the competition.
Leaning on innovation to counter competition
In the fourth quarter, PayPal spent $289 million on product R&D (research and development). The amount represented 6.8% of PayPal’s total revenue in the quarter.
But PayPal’s fellow market leaders, which are also facing growing competitive threats, are spending far more on R&D projects. Baidu (BIDU), for instance, spends ~15% of its revenue on R&D. Baidu is under pressure to preserve its position as China’s top Internet search engine provider.
In the fourth quarter, Alphabet (GOOGL) and Facebook (FB) spent 15% and 20% of their revenues, respectively, on R&D projects. Alphabet’s Google and Facebook are under pressure to defend their dominance in the digital advertising market.
PayPal is expected to report its first-quarter earnings results next month. We’ll have to wait and see how the company’s response to its growing competition may be affecting its R&D budget allocation.
Chipotle Mexican Grill has tapped into PayPal’s Venmo app to raise digital awareness for its brand and send out cash rewards to customers.
Broadcom (AVGO) stock fell ~8.5% after markets closed yesterday following the semiconductor giant's fiscal 2019 second-quarter earnings release. It missed analysts' revenue estimate and cut its fiscal 2019 revenue guidance by $2 billion to $22.5 billion due to sluggishness in its semiconductor solutions business.
The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets year-to-date, rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14. The sentiment for gold, however, has been turning around.
Safe havens such as Treasuries and gold were back in favor on June 14 as stocks fell due to rising tensions in the Middle East, concerns over growth, and the looming threat of the US-China trade war. The tech-heavy Nasdaq Composite Index fell 0.67% in the first hour of trading.
Lululemon (LULU) stock rose 2.1% on June 13 in reaction to better-than-expected first-quarter results and an upgraded outlook for fiscal 2019 overall. The company's first-quarter adjusted EPS grew 34.5% to $0.74 on revenue growth of 20.4% to $782.32 million. Analysts had expected EPS of $0.70 and revenue of $755.31 million. Here's why the outlook got an upgrade.
As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.
Amazon is discontinuing its Amazon Restaurants service, which has been delivering food for restaurants in parts of the United States. Amazon Restaurants launched in the United States in 2015 and entered the British market the following year. However, it met strong opposition in the British market.