PayPal, the digital payments leader, is facing a challenging day as its shares plummet by approximately 11%. Despite exceeding revenue and earnings expectations in its 4Q23 report, PayPal has experienced a decline in active accounts. Additionally, the company’s guidance for the future fell short of expectations, leading to disappointment among investors.
In the fourth quarter, PayPal’s revenue increased by 8.1% year-over-year to $8 billion, surpassing the Street’s call by $130 million. The adjusted earnings per share (EPS) of $1.48 also outperformed analysts’ forecasts by $0.12. Notably, there were other positive metrics as well. Total payment volume (TPV) witnessed a 15% increase (13% FXN) to $409.8 billion, while payment transactions per active account rose by 14% to 58.7.
However, on the downside, the total number of active accounts dropped from 435 million at the end of 2022 to 426 million. Looking ahead, PayPal expects adjusted EPS of approximately $5.10 for 2024, which is similar to the previous year but falls below Wall Street’s forecast of $5.53. For the first quarter, PayPal anticipates mid-single-digit EPS growth, with an estimated figure of around $1.23, slightly below the consensus estimate of $1.26.
This period marks a transition for PayPal with its new CEO, Alex Chriss, aiming to re-accelerate the company’s growth. While investors may be disappointed with the progress thus far, Goldman Sachs analyst Michael Ng believes that PayPal is on the right track and that the cautious outlook could ultimately prove beneficial.
According to Ng, “the quarter was relatively balanced with 2024E estimates being sufficiently conservative and setting up PYPL to potentially beat numbers throughout the year on better opex discipline and new product contributions (which isn’t reflected in the guidance).” Ng also highlights positive factors such as PayPal’s new disclosures regarding TPV growth, the incorporation of SBC as an expense in adjusted results, and the commitment to returning $5.0 billion to shareholders through repurchases in 2024.
In summary, Ng reiterates his Buy rating on PayPal shares, emphasizing that the company’s consumer brand trust and ongoing investment in value-added features should support its current market share position. He also believes that PayPal’s opex efficiencies, relative to historical levels, will position the company for strong performance when ecommerce growth returns to historical double-digit growth rates. Ng has set a price target of $74 (down from $80), indicating a potential surge of 32% in the shares over the next year.
Among Ng’s colleagues, there is an almost equal split between PayPal bulls and conservatives. With 12 buy ratings and 13 holds, the stock has a moderate buy consensus rating. The average price target of $69.23 suggests that the shares will trade at a premium of approximately 24% in a year.
It is important to note that the opinions expressed in this article are solely those of the featured analysts. Investors should conduct their own analysis before making any investment decisions.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
