PayPal Reports In-line Results, Analyst Sees Lowered Guidance as 'Likely Final Cut'

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PayPal Reports In-line Results, Analyst Sees Lowered Guidance as 'Likely Final Cut'
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PayPal (NASDAQ: PYPL ) reported Q1 earnings and revenue that matched analyst estimates, driving its shares up more than 2% in premarket trading.

The company reported an EPS of $0.88 and revenue of $6.5 billion. Revenue grew 7% YoY, while total payment volume (TPV) is up 13% from the same period last year.

Excluding eBay, revenue growth totaled 15%. PayPal reported 429 million active accounts in the period, up 9% QoQ, driven by a surge in the Venmo user base.

For Q2, the financial services company expects Q2 non-GAAP EPS of $0.86, missing the consensus estimates of $1.12. PYPL expects net revenue growth of roughly 9% in the period, which rises to 14% when excluding eBay.

For FY 2022, PYPL expects EPS in the range of $3.81 to $3.93, missing the analyst consensus of $4.63. It also estimates FY revenue growth of 11% to 13% and a TPV growth of 13% to 15%.

CEO Dan Schulman said PayPal slashed its medium-term outlook due to challenges related to macroeconomic conditions and e-commerce penetration. Schulman noted that PayPal’s “shareholders expect more from us than our track record over the past several quarters."

He said that 2022 is also a difficult year to forecast as "forecasting normalized consumer ecommerce spending as we come out of the pandemic is exceedingly complex."

The company also expects headwinds from its decision to exit Russia following its invasion of Ukraine, joining a number of other Western companies and brands.

Raymond James analyst John Davis says the lowered guidance is “likely final cut.” The analyst remains cautious as near-term catalysts are still unclear.

“While this appears draconian, the downward revision to guidance and the removal of mid-term targets was largely expected by investors and provides a more realistic baseline for forward expectations. Still, we note PYPL will be a show-me story throughout FY22 and with the stock trading at ~19x our updated FY23 estimates, we await greater confidence that estimates will ultimately prove conservative and thus believe the stock will be range bound in the near to medium term,” Davis wrote in a client note.

Citi analyst Ashwin Shirvaikar says that PYPL stock trades higher despite lowered guidance as “investors can believe the new estimates are achievable.” The analyst lowered the price target to $120.00 per share from $140.00.

“Our numbers and target are lower, but investors with a multi-quarter timeframe should certainly do more work on PYPL at current levels,” Shirvaikar wrote in a note.

By Senad Karaahmetovic

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