Written by Brenda Nakalema

Bad day for Paypal stocks after poor revenue forecast

Paypal took its worst hit since before the pandemic after shares plunged because of the less than enticing sales guidance …

Paypal took its worst hit since before the pandemic after shares plunged because of the less than enticing sales guidance for next year. The stock experienced its steepest decline since March 16, 2020, when the covid-19 outbreak led to a shut global shut down of most businesses.

Paypal’s third-quarter earning report initially elicited enthusiasm amongst investors not because of the results but because of the partnership between its Venmo app and Amazon. Through this partnership, Paypal users will be able to make purchases on Amazon.com and the Amazon shopping app with their Venmo accounts.

Despite this initial good news, optimism quickly disappeared during the earnings call when Paypal CEO Dan Schulman presented the sales guidance for the coming year. The company said revenue for 2022 will increase about 18%, equal to full-year sales of close to $30 billion, which fell short of analysts projected revenue of $31.6 billion.

“We are seeing the impact of global supply chain shortages in our merchant base, consumer confidence is weakened with the absence of stimulus payments, and with the economy re-opening, more people may be likely to do their holiday shopping in-store,” said Schulman.

The Paypal stock surged during the height of the pandemic in 2020 as more and more consumers turned to e-commerce. However, by the time it issued guidance, the company had already missed estimates on its third-quarter revenue and lowered its forecast for the year.

The stock has been down 14% since 2021 and only realized a small gain after announcing that it was in late-stage talks to acquire the social media app Pinterest. The company claimed to be looking to enhance shareholder value and was vetting a few select deals that would meet its strict criteria. This, however, was also later refuted by Schulman, saying he wasn’t attempting to buy Pinterest but was instead exploring all potential opportunities available to the company.

However, analysts at D. A Davidson have maintained their buy rating on the stock while lowering its price target to $275 from $325. The shares are currently trading at their lowest price of the year, $201. Another set of analysts at JMP securities also held its buy recommendation but lowered its target to $260 from $300.

As if its post covid-19 future isn’t already in question, Paypal is also preparing for a future without eBay, which might further negatively affect its sales. eBay is in the process of transitioning sellers off Paypal and onto its own payment system. Paypal reported a 45% drop in volume on the eBay marketplace, which now accounts for less than 4% of revenue.