The Earnings Report for PayPal PYPL…..
The Nasdaq has been bouncing hard over the past few
days, which has allowed PYPL stock to bounce too. However, earnings were just
too disappointing to keep that rally alive.
released its fourth-quarter and full-year 2021 results after the market closed
on Tuesday, and to put it mildly, investors weren't too impressed.
Revenues were mostly inline and earnings of $1.11 a
share were a penny shy of expectations. Guidance was the real problem though,
as management’s outlook for 2022 disappointed investors.
payment volume rose 23% in the fourth quarter, slowing from a 33% growth pace
for all of 2021. Non-GAAP operating margins fell 291 basis points from a year
"For the quarter, our guidance
contemplated generating about 12.9 million net new actives [accounts] on an
organic basis. We had a slower-than-expected finish to the year and came in
below our target," PayPal CFO John Rainey said on a Tuesday evening earnings call.
9.8 million net new active accounts in the fourth quarter.
pinned the shortfall on several factors.
"First, the more muted into the
year for e-commerce growth driven by both supply chain challenges, as well as
pullback in spending by lower-income consumers affected consumer growth.
Second, in the back half of the quarter, we also changed course on some of our
customer acquisition strategies, including incentive-led campaigns. And lastly
and most impactful to the quarter, there were certain accounts that we
disqualified or excluded from our net new active number.," Rainey added.
For the full
year, PYPL said it sees earnings of $4.60 to $4.75 a share. Wall Street
analysts had estimated $5.23.
expecting revenue growth in the 15% to 17% range for 2022, while analysts had
been looking for about 18%. The company expects to add 15 million to 20 million
new accounts in 2022, which was also lower than many had expected.
to the weak outlook, PayPal's user growth wasn't quite what investors had hoped
to see. The company reported that it discovered 4.5 million
"illegitimate" accounts, and after excluding these, it missed its own
Analysts Cutting Targets…..
earnings report just posted immediately prompted at least 27 Wall Street
analysts to cut their price targets.
average 12-month target now sits at roughly $202, down from the $276 it was cut
to in late November following underwhelming third quarter results. The stock
has lost 58% since reaching a record high of $309 in July, dragging it to its lowest
level since May 2020.
“While directionally the below
consensus guide is not a surprise to us, the magnitude of the impacts are clearly
more severe,” said Cowen
analyst George Mihalos. He cut his target price on the stock to $174 from $221
previously but maintained his outperform rating.
analysts took an even more bearish stance on the company, with at least three
firms including Raymond James, BTIG and Oddo BHF downgrading the stock to a
“We struggle to see how the stock
garners a higher multiple in the short to medium term,” wrote Raymond James analyst John
Davis. “Estimates are heading
significantly lower for the second consecutive quarter, and we believe the
stock is fully valued,” he added.
were also disappointed on the outlook for new accounts.
"PayPal now expects only ~15-20
million net account adds in FY22 vs. our 55-60 million expectation with a
return to pre-pandemic trends of ~30-40m per year thereafter. This net account
guidance is about half of its previous guidance set on its February 2021
analyst day through 2025 with PayPal turning its focus to higher engaged
accounts and raising average revenue per user," explained Deutsche Bank analyst
his Buy rating on PayPal intact but slashed the price target on the stock to
$200 from $260.
operating agreement with eBay, its former parent, has ended and the online
marketplace's transition to its own payments platform is impacting transaction
volumes, the company said on Tuesday.
transition is expected to put $600 million of revenue pressure in the first
half of this year, Chief Executive Officer Dan Schulman said on a conference
call with analysts.
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.
projected a 6% rise in revenue in the current quarter, far lower than the 11.7%
growth estimated by analysts, as per IBES data from Refinitiv.
growth rates during the holiday season were lower than industry expectations,
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.