PayPal rises as Mull analysts lower 2022 forecast as ‘compensating event’
Analysts wonder if the worst is over for PayPal Credits (PYPL) following March quarter earnings that hit Wall Street targets and lowered 2022 forecasts. PYPL stock rose on Thursday after hitting a fresh 52-week low ahead of its March results release first trimester.
After the market closed Wednesday, the e-commerce company said March quarter earnings were 88 cents per share, down 28% from a year earlier. Revenue rose 7% to $6.5 billion, San Jose, Calif.-based PayPal said.
Analysts had expected PayPal earnings of 88 cents per share on revenue of $6.4 billion. A year earlier, PayPal earned $1.22 per share on sales of $6.03 billion. PayPal lowered its 2022 forecast for earnings per share, revenue and total payment volume.
Analysts are wondering if the forecast drop marks a “compensating event” that could renew investor interest in the payout stock.
“The reset was necessary to make the stock investable, but distinguishing between conservatism and fundamental pressure will be difficult in the near term,” Jefferies analyst Trevor Williams said in a note to clients.
Slowing PayPal customer growth
PYPL shares rose 4.6% to 86.44 in morning trading in the stock market today. In Wednesday’s regular session, PYPL stock hit a new 52-week low.
“The pace of first-quarter revenue is positive, as is – hopefully – the guidance reset,” Mizuho Securities analyst Dan Dolev said in his note to clients. “However, with the slowdown (in customer growth), disappointing Venmo stats, and questions regarding the future of the payment button, we believe management has some explaining to do.”
Amid concerns over customer growth, the e-commerce company said it added 2.5 million consumer accounts. This brought its total to 429 million.
During the March quarter, the total volume of payments processed by merchant customers increased 13% to $323 billion, as estimated. Analysts had forecast a total payment volume of $322.6 billion.
PayPal stock holds a relative strength rating of just 4 out of the best possible 99, according to IBD Stock Checkup.
For 2022, PayPal forecasts revenue growth in the range of 11% to 13% compared to previous forecasts of 15% to 17% growth.
PayPal stock plunges in 2022
“Despite a generally strong first quarter, PayPal sees an overall more muted outlook for e-commerce, lower total cross-border payment volume, macroeconomic pressures and spending ahead,” the Susquehanna analyst said. James Friedman, in a note. “But with the network’s revelations already showing a slowdown in e-commerce, those headwinds may have already been priced into stocks.”
Meanwhile, PayPal stock had fallen about 55% in 2022. Shares plunged in February after its 2022 forecast missed estimates and the company abandoned its five-year financial targets.
“PYPL now expects teen plan growth in mid-2022,” Bank of America analyst Jason Kupferberg said in a note. “Some may interpret this as a good indicator of post-2022 growth. But in our view, visibility on normalized earnings capacity remains limited, while uncertainty persists around PYPL’s strategic pivot favoring engagement (in the basic payment and the new digital wallet) compared to the net new additions.”
Also, CFO John Rainey plans to quit the retail giant’s online payment site walmart (WMT).
former parent eBay (EBAY), which created PayPal in 2015, has nearly finished transferring its payment processing from PayPal to Netherlands-based Adyen.
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Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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