PayPal Projects Slower Growth in the First Quarter

PayPal Holdings, Inc. projected slower growth in the first quarter, pointing to several factors contributing to the cautious outlook.

Currently, the financial technology company faces inflationary pressures, weaker consumer sentiment, and a supply crunch.

The said problems have a more pronounced impact on spending, specifically among the firm’s lower-income customers.

At the same time, PayPal projects headwinds after its operating agreement with eBay ended.

In 2015, the two companies split, and the e-commerce giant gradually turned to its own payment system.

This online marketplace’s changeover weighed on the payment firm’s transaction volumes.

In addition, PayPal expected the transition to put $600.00 million of revenue pressure in the first half of this year.

Notably, it also forecasted its revenue growth in the current quarter to slow even further. It projected a gain of 6.00%, far lower than the average analysts” estimate of 11.70% growth.

It anticipated its revenue to increase 15.00% to 17.00% for the full year, below the market projection of 17.90%.

Moreover, it estimated its Q1 adjusted earnings to post at $0.87 per share, below the $1.16 consensus.

The company also expects to add 15.00 million to 20.00 million new accounts this year. It walked back from its set goal of 750.00 million total accounts in 2021.

PayPal Reports Mixed Q4 Results

In the latest earnings call, PayPal gained 13.00% to $6.92 billion in its fourth-quarter revenue, edging from the $6.87 consensus.

However, its earnings posted at $1.11 per share, slightly lower than the expected figure of $1.12.

The firm also processed $340.00 billion in payments in the quarter, which is 23.00% from a year earlier.

Then, its peer-to-peer payment service Venmo obtained a total of about $61 billion in payments.

Furthermore, PayPal added 9.80 million net new active accounts.

This figure includes 3.20 million accounts from the acquisition of Paidy, the Japanese buy-now-pay-later business it purchased last September.

However, total payments volume was at $339.5 billion in the final three months of last year, the smallest increase in two years.

PayPal now exerts its efforts to increase activity on its platform by adding new services. It launched a high-yield savings account and can buy and trade cryptocurrencies.

Meanwhile, the announcement sent the company’s stock price to a plunge of 17.92% or 31.50 points to $144.30 per share in the after-hours market.