PayPal Shares Fell More Than 17 Percent In After Hours Trading After Reporting Q4 Earnings And Weak Guidance For 2022

PayPal reported its earnings on Tuesday and here is how the company fared. PayPal reported earnings per share of $1.11 per share, falling short of the $1.12 per share estimated that analysts had expected according to Refinitiv. Revenue however beat the estimates of $6.87 billion at $6.92 billion. The company’s shares fell over 17 percent in after-hours on Tuesday after it published its earnings and first-quarter guidance that fell short of analysts’ estimates.

While analysts expect first-quarter non-GAAP earnings per share of $1.16, PayPal says it expects just 87 cents. The company projects revenue to grow between 15 and 17 percent for the whole of 2022, on a spot and foreign-currency-neutral basis. Analysts, on the other hand, expect growth for 2022 to be 17.9 percent.

PayPal’s CEO Dan Schulman said that the company took “a measured approach” to guidance but revenue is expected to accelerate by the second half of the year. He added that “We’ve got the eBay transition to work our way through. This transition is hiding some of the underlying strength of the business”, emphasizing that eBay put $1.4 billion of revenue pressure on the company last year, and should be closer to $600 million this year. By the third quarter, PayPal won’t have to adjust results for eBay.

eBay acquired PayPal about two decades ago to handle payments for its website but these two companies split in 2015 and since then, the former has been taking steps to stand on its own, away from PayPal.

The CEO also included inflation and supply chain issues as part of the reasons for the shortcomings that it encountered in the quarter. The company user numbers were also slow on growth. According to CFO John Rainey, millions of new accounts were excluded from quarterly user growth as they were “illegitimate” accounts that joined the platform during incentive-based campaigns. He added that while the number was insignificant to the platform’s customer base, it affected its ability to meet its guidance in the quarter.

“We regularly assess our active account base to ensure the accounts are legitimate. This is particularly important during incentive campaigns, that can be targets for bad actors attempting to reap the benefit from these offers without ever having an intent to be a legitimate customer of our platform”, he said.

This year, however, the platform expects to add between 15 and 20 million new users. “Moving forward, we will continue to grow our users, but our focus will be on sustainable growth and driving engagement. To be very clear, this is a choice on our part. We could increase our spin and accelerate our net new active trajectory. However, we believe there are better ways to achieve our financial results.

Last year, the goal was to reach a total of 750 million accounts.