PayPal stock is having its worst day in 20 months after a disappointing revenue forecast

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  • PayPal’s shares fell 12% after the payments company gave a revenue forecast that was well below analysts’ estimates.
  • This is the biggest drop for the stock since the early days of the pandemic in March 2020.
  • PayPal investors are focusing more on the company’s guidance than the announced partnership between Venmo and Amazon.

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On Tuesday, PayPal shares fell the most since the early days of the pandemic, after an earnings report in which the company cited consumer spending concerns and offered disappointing sales guidance for the next year.

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The stock was up more than 11% as of noon in New York. This is the biggest drop since March 16, 2020, when the spreading COVID-19 pandemic forced businesses to close and cities and states to enforce lockdowns, Black Monday in October 1987. It was the worst day since the US stock market.

Investors initially applauded PayPal’s third-quarter earnings report, not because of the results, but because of a partnership the company announced between its Venmo payments app and Amazon. Starting next year, PayPal users will be able to make purchases Amazon.Com and the Amazon mobile shopping app with their Venmo accounts.

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However, that optimism quickly faded during the earnings call, when PayPal CEO Dan Schulman gave guidance for the next year. The company said revenue for fiscal 2022 would grow by about 18%, equating to close to $30 billion in full-year sales. According to Refinitiv, analysts were forecasting revenue of $31.6 billion.

“We are seeing the impact of global supply chain constraints across our merchant base, consumer confidence weakened by the absence of stimulus payments, and, as the economy reopens, more people are getting their holiday purchases in-store. Could be a possibility,” Schulman said. on call.

PayPal had already missed estimates on third-quarter revenue and lowered its forecast for the current year.

Stocks jumped during 2020 as consumers turned to e-commerce during the height of the pandemic. It is now down 14% in 2021, while the Nasdaq is up 23% for the year. Investors began to turn bearish on PayPal last month, reporting that the company was in talks of late to acquire the social media app Pinterest.

PayPal later said it was not looking to buy Pinterest. Shulman addressed the matter on Monday’s call, without naming Pinterest.

“It is our responsibility to explore all possible opportunities to increase shareholder value,” he said. “But obviously, only a select few deals will meet our very strict financial, strategic and capital allocation criteria.”

Several analysts lowered their price targets after the call.

Analysts at DA Davidson wrote in a note to clients on Tuesday, “PYPL was one of the biggest beneficiaries of the pandemic, but supply chain issues as well as uneven global macro recovery amid tough comps are challenging growth prospects.” Is.”

The firm maintained its buy rating on the stock, lowering its price target from $325 to $275. The shares are currently trading near $201, which is the lowest level in nearly a year.

JMP Securities also made its buy recommendation, but lowered its target from $300 to $260.

“Our understanding is that management may feel slightly snakebited by the sudden shift in demand across several sectors, particularly the travel that accompanies the Delta variant boom,” JMP analysts wrote on Tuesday.

He said the headwinds appear “transient”, only dissipating as early as next year, and described the Amazon deal as a “potential game changer.”

In addition to macroeconomic concerns, PayPal is preparing for an eBay-less future. Six years after the companies split, eBay is in the process of transitioning sellers from PayPal and into its own payment system. PayPal said volumes on the eBay Marketplace dropped 45% in the quarter and now represents less than 4% of revenue.

In a report following PayPal’s results, analysts at Wedbush Securities lowered their price target from $330 to $240, as they noted that “the eBay transition continues to impact healthy metrics.” He maintained his buy rating on the stock.

— Businesshala’s Mackenzie Sigalos

Watch: PayPal’s 25% growth is ‘quite impressive’

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