On Wednesday, PayPal stock closed down 24 percent, which came a day after the company “provided weak guidance,” placing some of the blame on inflation, according to CNBC.
Looking at quarter four, PayPal reported mixed results including earnings per share of USD1.11, ex-items and missed the expected USD1.12. However, it did beat revenue estimates, recording USD6.92 billion and exceeding that initially expected USD6.87 billion, as reported by Refinitiv.
PayPal CEO, Dan Schulman, told CNBC that the company took “a measured approach” to guidance, foreseeing an accelerating revenue during the last six months of 2022.
Among the challendes that Schulman noted was the transition of former eBay owner to Paypal’s payments platform and other “exogenous factors” such as inflation that brought down consumer spending and introduced supply chain issues.“
The company has also missed user growth goals, which is partially due to approximately 4.5 million “illegitimate” user accounts that signed up on the platform. According to the CFO, John Rainey, that has had an effect on the “ability to achieve our guidance in the quarter.”
On Wednesday, the fintech service previously known as Square, which is now known as Block, dropped 10 percent, in addition to the buy now pay later (BNPL) service, called Affirm, dropping nine percent.
Analysts Weigh-In
“While the pace of growth in net new accounts is expected to moderate in 2022, we are seeing a steady increase in user engagement metrics and expect to see more marketing behind driving engagement in 2022.”
– Canaccord Genuity Capital Markets analysts
The Canaccord note also read, “Already PYPL has shown that it remains nimble despite its size in exploiting rapidly emerging opportunities: scaling an impressive Buy Now Pay Later (BNPL) offering and launch of equity trading.”
According to BTIG analysts, PayPal is now a ”‘show me’ story”and pointed out new areas of “uncertainty” such as the “significant shift in the company’s approach to customer acquisition and engagement.”
BTIG also noted that the full-year forecast was cautious due in part to inflation and supply chain issues, which analysts mentioned “offered a sharp contrast with the more upbeat annual outlooks offered recently by the card networks.”
Source: CNBC
Photo Credit: Hanlire
