PayPal stock falls after company blames low inflation forecast

PayPal shares fell more than 22% on Wednesday, a day after the company provided weak guidance that it blamed in part on inflation.

PayPal reported mixed fourth-quarter results, which fell short of earnings per share estimates at $1.11, excluding items, versus $1.12 expected. It did, however, beat revenue estimates, bringing in $6.92 billion versus $6.87 billion expected, according to Refinitiv.

But he also said he expects non-GAAP earnings per share of 87 cents in the first quarter, while analysts had expected $1.16. It also forecast revenue to grow by around 15% to 17% for the full year of 2022, on a cash and foreign currency neutral basis. Analysts had expected year-over-year revenue growth of 17.9% for 2022.

The PayPal logo displayed on a smartphone.

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In an interview with CNBC, PayPal CEO Dan Schulman said the company has taken “a measured approach” to guidance, but expects revenue to accelerate in the second half.

He pointed to challenges including former owner eBay’s transition to its own payment platform and “exogenous factors” like inflation dragging down consumer spending and supply chain issues “affecting disproportionately” cross-border payments.

PayPal also missed its user growth targets in part due to 4.5 million “illegitimate” accounts joining the platform, which “affected our ability to meet our targets during the quarter,” the PayPal said. chief financial officer John Rainey. The company also backtracked on its user growth goals, which Rainey said was a “choice” to focus on “sustainable growth and driving engagement.”

Analysts at Canaccord Genuity Capital Markets, which maintained 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 primarily “winds opposites in the short term”.

“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,” says the Canaccord rating. “And already, PYPL has shown that it remains nimble despite its size to exploit rapidly emerging opportunities: scaling up an impressive Buy Now Pay Later (BNPL) offering and launching equity trading.”

Analysts expressed optimism over the previously announced announcement Venmo Partnership with Amazon, which they say “could be the biggest single catalyst for PYPL in 2022.”

Analysts at BTIG, who downgraded the stock to neutral and removed their $270 price target, said in a note on Tuesday that PayPal is now a “show me story. They cited new areas” of uncertainty,” including the “significant change in the company’s approach to customer acquisition and engagement.” They also pointed to executives’ assertions that the full-year guidance was conservative. in part due to inflation and supply chain issues, which analysts said “provided a stark contrast to the more upbeat annual outlook offered recently by card networks.”

– CNBC’s Kate Rooney contributed to this report.

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