PayPal Shares Plunged 22% After Mixed Fourth-Quarter Results

Feb 2, 2022 By MarketDepth

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PayPal (NASDAQ: PYPL) shares plunged 22% Wednesday after the company reported mixed fourth-quarter results and a weak outlook, which it attributed in part to ongoing inflation. After investors questioned its growth expectations, PayPal disclosed a big revenue hit amid the looming loss of marquee client eBay Inc.

Lower Than Anticipated Earnings

The multinational financial technology company reported earnings of USD1.11 per share, compared to the expected USD1.12 a share. Revenue amounted to USD6.92 Billion, higher than analysts anticipated USD6.87 Billion. Following the news, approximately 11 analysts cut their price targets on the stock and BTIG downgraded it to “neutral” from “buy”.

“We think that modestly weaker-than-expected results of the past couple of quarters are largely attributable primarily to uneven/disappointing eCommerce growth.”

Morgan Stanley analysts wrote in a note

Furthermore, PayPal expects first-quarter non-GAAP earnings of USD0.87 per share, meanwhile analysts expect USD1.16 a share. The company also predicts that the revenue will rise 15% to 17% for the full year 2022, though analysts predicted year-over-year revenue growth of 17.9% for 2022.

Ebay Exit

EBay’s exit is expected to add USD600 Million of revenue pressure to PayPal during the first half of this year, according to Chief Executive Officer Dan Schulman. 

“Taken together, supply chain management problems, inflationary pressure on spending by low income customers and ongoing steep declines in eBay volumes created stiff headwinds exiting 4Q/21 that will persist at least through 1H/22.”

Evercore ISI analysts wrote in a note