Analysts discuss whether the worst is over PayPal Holdings (PYPL) in the wake of the March quarterly results that reached the Wall Street targets and lowered the guidance for 2022. The PYPL share rose on Thursday after reaching a new low of 52 weeks before the result for the first quarter.
After the market closed on Wednesday, the e-commerce company said that earnings in the March quarter came in at 88 cents per share, a decrease of 28% from the previous year. Revenue increased 7% to $ 6.5 billion, said San Jose, California-based PayPal.
Analysts expected PayPal revenue of 88 cents per share on a turnover of 6.4 billion dollars. A year earlier, PayPal earned $ 1.22 per share on sales of $ 6.03 billion. PayPal lowered guidance for 2022 on earnings per share, revenue and total payment volume.
Analysts are discussing whether lowered guidance marks a “clearing event” that could renew investor interest in the payment stock.
“The recovery was necessary to make the stock investable, but distinguishing between conservatism and fundamental pressure will be challenging in the short term,” Jefferies analyst Trevor Williams said in a note to customers.
PYPL inventory: Customer growth slows
The PYPL share rose 4.6% to 86.44 in morning trading on the stock market today. In Wednesday’s ordinary session, the PYPL share reached a new low of 52 weeks.
“The first-quarter revenue rate is positive, and so is – hopefully – the reset of guidance,” Mizuho Securities analyst Dan Dolev said in a report. “But downturn (customer growth), disappointing Venmo statistics and questions about the future of the payment button, we think management has some explanations to do.”
Amid concerns over customer growth, the e-commerce company said it added 2.5 million consumer accounts in Q1, bringing the total to 429 million.
In the March quarter, total payment volume processed from merchant customers increased by 13% to $ 323 billion, in line with estimates. Analysts had estimated a total payment volume of $ 322.6 billion.
The PayPal stock has a relative strength rating of only 4 out of the best possible 99, according to the IBD Stock Checkup.
For 2022, PayPal estimates revenue growth in a range of 11% to 13% against previous guidance of 15% to 17% growth.
The PayPal share will plunge in 2022
“Despite a generally good 1st quarter, PayPal sees a more temperate outlook for e-commerce in general, declining TPV across national borders, macro pressure and spending going forward,” Susquehanna analyst James Friedman said in a report. “But with network revelations already showing a decline in e-commerce, these headwinds may have already been priced into stocks.”
Meanwhile, the PayPal share had retreated around 55% in 2022. The shares plunged in February after the guidance for 2022 missed estimates and the company left five-year financial targets.
“PYPL now expects turnaround growth in its mid-teens in the second half of 2022,” Bank of America analyst Jason Kupferberg said in a report. “Some may interpret this as a good proxy for growth after 2022. But in our view, visibility of normalized earnings remains limited, while uncertainty hangs around PYPL’s strategic turning point that favors engagement (in core cash and new digital wallet) over new net grants.”
CFO John Rainey also plans to leave the online payments page for the retail giant Walmart (WMT).
Former parent eBay (EBAY), which separated PayPal in 2015, has almost finished moving its payment processing from PayPal to Netherlands-based Adyen.
If you are new to IBD, consider taking a look at the stock trading system and the basics of CAN SLIM. Recognizing chart patterns for issues such as PayPal stocks is a key to the investment policy.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cyber security and cloud computing.
Best growth stocks to buy and see: See updates to IBD stock lists
Do you want to make quick profits and avoid big losses? Try SwingTrader
How to use the 10-week moving average for buying and selling