Managing Director James Hamel of Artisan Partners has been slowly lessening his position in eBay Inc (EBAY) due to PayPal’s increased competition with newer virtual payment systems.
“We believe PayPal’s profit cycle is much more mature now. It’s still growing at a nice rate, but PayPal faces an enormous amount of new competition from what we believe will be an emerging trend in the not-too-distant future — virtual payment systems,” Hamel said.
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Hamel points to products such as Square and Google Wallet as competitors for PayPal, and he also expects other systems to surface as this trend continues.
“Perhaps even Apple will have a payment scheme. The competition for virtual wallets that are secure and more easily deployed is creating a competitive headwind for PayPal,” Hamel said.
“The valuation is still very reasonable, so we haven’t completely eliminated eBay from the portfolio. But we believe it just doesn’t have the acceleration that we saw,” Hamel added.
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