|From: Glenn Petersen||2/2/2022 7:03:25 AM|
|PayPal stock plunges on weak earnings guidance|
PUBLISHED TUE, FEB 1 20224:28 PM EST
UPDATED TUE, FEB 1 20229:21 PM EST
Lauren Feiner @LAUREN_FEINER
Kate Rooney @KR00NEY
-- PayPal reported mixed Q4 2021 earnings Tuesday and provided guidance for the next quarter that fell short of analyst estimates.
-- The company expects Q1 non-GAAP earnings per share of 87 cents, short of the $1.16 analysts anticipated.
-- It also reported weak full year revenue growth guidance for 2022.
PayPal shares fell more than 17% after hours on Tuesday after reporting mixed results and Q1 guidance that fell below analyst estimates.
Here are the key numbers:
Earnings per share: $1.11 per share, ex-items vs. $1.12 per share expected, according to a Refinitiv survey of analysts
Revenue: $6.92 billion vs. $6.87 billion expected, according to Refinitiv
The company expects first-quarter non-GAAP earnings per share of 87 cents, short of the $1.16 analysts anticipated.
PayPal forecast revenue to grow about 15% to 17% for the full year 2022, on a spot and foreign-currency-neutral basis. Analysts had expected year-over-year revenue growth for 2022 to be 17.9%.
PayPal CEO Dan Schulman told CNBC that the company took “a measured approach” to guidance but revenue should accelerate in the second half of the year.
“We’ve got the eBay transition to work our way through. This transition is hiding some of the underlying strength of the business,” Schulman said, adding that eBay put $1.4 billion of revenue pressure on the company last year, and should be closer to $600 million this year. By the third quarter, PayPal won’t have to adjust results for eBay.
The dot-com-era tech giant acquired PayPal twenty years ago to handle payments for its website. In 2015, the two companies split and eBay has been slowly transitioning to its own payment system, and off from PayPal.
Schulman also blamed “exogenous factors” like inflation weighing on consumer spending among parts of PayPal’s userbase, and supply chain issues “disproportionately impacting” cross-border payments, especially out of China.
Slower user growth, too
PayPal’s user numbers, measured by net new active accounts, also missed the company’s prior targets.
The lower total was in part due to 4.5 million “illegitimate” accounts that joined the platform during incentive-based campaigns. Finance and tech companies often offer perks, such as cash bonuses, to drive users to their apps. But CFO John Rainey said in this case, millions of new accounts were excluded from quarterly user growth.
While the number was immaterial to PayPal’s customer base of 426 million “it affected our ability to achieve our guidance in the quarter,” Rainey said.
“We regularly assess our active account base to ensure the accounts are legitimate,” he said on the fourth-quarter earnings call. “This is particularly important during incentive campaigns, that can be targets for bad actors attempting to reap the benefit from these offers without ever having an intent to be a legitimate customer of our platform.”
PayPal said it expects to add 15 million to 20 million new accounts this year and walked back its goal of 750 million total accounts set by the company last year.
“Moving forward, we will continue to grow our users, but our focus will be on sustainable growth and driving engagement,” Rainey said. “To be very clear, this is a choice on our part. We could increase our spin and accelerate our net new active trajectory. However, we believe there are better ways to achieve our financial results.”
PayPal (PYPL) Q4 2021 earnings (cnbc.com)
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|To: Glenn Petersen who wrote (152)||2/2/2022 12:34:27 PM|
|From: Sr K|
PayPal Shares Tumble After Disappointing Outlook
Payments giant cited effect of inflation on personal spending in tempering its growth outlook for the year
PayPal has disappointed investors for the second quarter in a row.PHOTO: GABBY JONES/BLOOMBERG NEWS
Peter Rudegeair Follow
Caitlin Ostroff Follow
Updated Feb. 2, 2022 10:10 am ET
PayPal Holdings Inc. PYPL -26.04% shares headed toward their worst one-day performance on record after the company lowered its profit outlook for 2022 and walked back an ambitious growth strategy it put in place last year.
PayPal shares sank 24% Wednesday morning, erasing tens of billions of dollars in market value. For much of 2020 and 2021, PayPal was an investor favorite as the migration to online shopping over the course of the pandemic boosted its transaction volumes and profits, sending its market capitalization higher than all U.S. banks except JPMorgan Chase & Co.
Investor sentiment started to sour last fall as lockdown measures eased. After Wednesday’s drop, PayPal’s stock is back to its level from May 2020.
Executives said a number of forces will pressure its business in 2022. Those include the runoff in government stimulus packages, labor shortages, the Omicron variant, inflation and supply-chain issues. It is also losing business from one of its biggest customer sources— eBay Inc. —faster than expected because the online marketplace is building out its own payments arm.
In a surprise to analysts and investors, PayPal also abandoned a target it established last year of roughly doubling its active user base to 750 million accounts. Chief Executive Dan Schulman said the focus now was on getting frequent PayPal users to use its services more often and not on pursuing customers that are unlikely to transact with PayPal regularly.
“You can officially add PayPal to your list of pandemic highfliers that are experiencing a quite bumpy landing,” wrote MoffettNathanson analyst Lisa Ellis in a research note.
For 2022, PayPal expects to generate adjusted earnings per share of roughly $4.67, well below the $5.21 consensus estimate of analysts polled by FactSet. PayPal also forecast revenue growth of 15% to 17%, less than the 18% growth figure the company released a few months ago, which investors then viewed as a disappointment.
“Our medium-term targets simply did not contemplate inflation at a 40-year high and supply chain issues not seen in my lifetime,” Chief Financial Officer John Rainey said on the earnings conference call. “As such, 2022 is now off to a slower start than we previously anticipated and we are taking a more conservative stance on the year.”
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|From: Glenn Petersen||4/30/2022 5:08:42 AM|
|PayPal Hits the Reset Button|
Company deeply cut its 2022 guidance, but shares could now stabilize as investors look toward the next big things in digital finance
By Telis Demos
Wall Street Journal
April 28, 2022 11:36 am ET
The comedown for PayPal’s PYPL -4.52% once-highflying stock has been harsh, but a reset of expectations could cushion its landing.
PayPal said Wednesday that supply-chain disruptions hitting e-commerce sales, plus a normalization of the mix of spending in-store and virtually, are continuing to make it hard to forecast its business. So the company is making sharp cuts to its guidance for 2022. That includes net revenue growth being about 4 percentage points slower than previously forecast, now at about 11% to 13%. It is also withdrawing its medium-term guidance.
The good news for the stock is that expectations were already substantially reduced after the company flagged a strategic pivot earlier this year. The reset of guidance may actually be an entry point for some investors back into the stock.
Alongside many fintechs, PayPal shares had plunged 56% so far in 2022 through Wednesday’s close. At the new, lower guidance for 2022 adjusted earnings per share, and after a more than 3% gain in the stock on Thursday morning, PayPal is now trading around 22 times forward earnings. That multiple is still historically quite low. Even before the pandemic, from 2017 to 2019, the company typically traded well north of 30 times analysts’ forward estimates, according to FactSet data.
One thing that might help the company earn back a higher multiple is that growth may soon resemble its prepandemic pace, especially as the company gets further away from the end of its prior eBay relationship. The midpoint of the updated guidance already implies more than 15% growth in the second half of 2022. That could approximate or exceed the revenue growth rate in 2019. Given that the company says it is building in a worsening macroeconomic environment into the forecast, any positive surprises to the backdrop could now set the stock up for gains.
There are of course some big differences to 2019, too. One is that there might now be slower growth ahead in the overall global e-commerce market than there was back then, since so much expansion happened during the pandemic. Though with a focus on fast-growing merchants, PayPal can still exceed market growth. For example, its Braintree online payment-processing business grew volume 61% year-over-year in the first quarter.
In addition to payments growth, the pandemic may have likewise pulled forward growth in the number of PayPal accounts. After adding over 120 million net new active accounts over 2020 and 2021, PayPal now anticipates adding about 10 million in 2022—half of the top end of its prior guidance for the year, and about a quarter of what it added back in 2019. Partly this is by design, as PayPal lets users who rarely transact churn off, arguing that spending to keep them isn’t a high-return investment.
That sets the stage for PayPal to focus more intensely on increasing revenue from customers and merchants it already actively engages. Though there are many players fiercely competing in different components of digital payments and commerce, PayPal has a broad and global platform: It can offer payment processing, digital wallets, buy-now-pay-later, discounts and rewards, remittances, online savings accounts, bill payments, peer-to-peer payments, cash-back credit cards, cryptocurrencies, and far more. It is also still throwing off billions in cash to fuel further acquisitions or investment.
So, whatever drives the next leg of growth in digital finance for a consumer or business, PayPal will very likely be there. But PayPal shares may not fly so high again until those next catalysts come into sharper focus.
Write to Telis Demos at email@example.com
PayPal Hits the Reset Button - WSJ
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