February 4, 2022: -On Wednesday, Shares of PayPal closed down 24%, a day after the company provided weak guidance that it blamed in part on inflation.
PayPal reported mixed results for the fourth quarter. It beat on revenue estimates, although reporting $6.92 billion vs. $6.87 billion expected, according to Refinitiv.
Ex-items, earnings per share of $1.11 missed the $1.12 expected.
Analysts expected year by year revenue growth of 17.9% for 2022. But it said it expects first-quarter non-GAAP earnings per share of 87 cents, while analysts had been projecting $1.16. It anticipated that revenue would grow about 15% to 17% for full-year 2022 on a spot and foreign currency-neutral basis.
In an interview with CNBC, PayPal CEO Dan Schulman said the company took “a measured approach” to guidance but expected revenue to accelerate in the second half of the year.
He pointed to challenges, which include the transition of former owner eBay to its own payments platform and “exogenous factors” such as inflation bringing down consumer spending and supply chain issues “disproportionately impacting” cross-border payments.
PayPal missed user growth targets due in part to 4.5 million “illegitimate” accounts that joined the platform, which “affected our ability to achieve our guidance in the quarter,” CFO John Rainey said. The company walked back its user growth goals, which Rainey said was a “choice” to focus on “sustainable growth and driving engagement.”
Block, the fintech service formerly known as Square, slid 10% on Wednesday. And buy pay later service Affirm was down 9%.
Canaccord Genuity Capital Markets analysts, maintaining a buy rating on the stock but lowered their price target from $315 to $215, wrote in a note Tuesday that PayPal’s challenges are mainly “short-term headwinds.”
“While the speed of growth in net accounts is expected to moderate in 2022, we are seeing a steady increase in user engagement metrics and expect to see marketing behind driving engagement in 2022,” the Canaccord note said. “And PYPL has shown that it remains nimble despite its size in exploiting rapidly emerging opportunities: scaling an impressive Buy Now Pay Later offering and launch of equity trading.”
The analysts expressed optimism about the announced Venmo partnership with Amazon, which they expect “could be the largest single catalyst for PYPL in 2022.”