• PYPL+0.85 (+0.42%)

PayPal shares sank 4.36% on Wednesday after Bernstein analysts downgraded the stock from the equivalent of a buy to hold and cut the price target to $220 from $260, citing fears that the company faces a broad array of risks.

Shares of PayPal are down almost 13% for the year while the Nasdaq Composite is up 25%.

“PayPal’s positioning as a leading digital wallet in an increasingly digital world is hard not to acknowledge (one of the reasons we upgraded the stock 2yrs ago),” the analysts wrote. “That said, we believe change is accelerating, and PayPal now risks getting disrupted vs. being a disruptor.”

Bernstein analysts are concerned about the rising concentration of e-commerce around big platforms like Shopify and Amazon, which account for 32% of the U.S. e-commerce market.

Shopify is “emerging as an unassailable competitor” in PayPal’s core small and medium-sized business market, the analysts said, and poses a further risk as it launches its own payments platform. Likewise, Amazon is set to begin accepting PayPal’s Venmo as an alternative payment in 2022, but Bernstein believes Venmo is currently “severely under-monetized.”

The analysts are further concerned that PayPal is “under siege by a thousand cuts” from other payment solutions ranging from Apple Pay and Square to buy now, pay later options from Affirm and Klarna, which are growing between 50% and 100% annually, the analysts wrote.

“We believe Square’s pending acquisition of Afterpay is game changing and accelerates its efforts towards becoming a dominant payments ecosystem in the U.S.,” the analysts wrote, noting that PayPal faces competitive risks as Square moves online and further competes against PayPal with Cash App.

“While PayPal is actively investing and evolving, it simply has more turf to defend vs. peers in our view,” they wrote.