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PayPal (PYPL) Shares Down Over 25%, Weak Guidance and Slow User Growth Prompt Analysts’ Stock Downgrade

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by Steve Muchoki · 3 min read
PayPal (PYPL) Shares Down Over 25%, Weak Guidance and Slow User Growth Prompt Analysts’ Stock Downgrade
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PayPal stock dropped approximately 50.98%, 29.70%, 41.91%, and 31.05% in the past year, YTD, three months, and one month respectively through Tuesday.

PayPal Holdings Inc (NASDAQ: PYPL) stock closed Tuesday trading at $132.57, down 24.59% from the day’s opening price. PayPal stock continued with the dip during the after-hours with approximately 2.84% as of February 2, 2022, at 7:59 p.m EST. The global digital payment platform reported mixed 2021 Q4 earnings results that have sparked different opinions.

During the fourth quarter, the company announced earnings per share of $1.11 on revenue of $6.92 billion. However, according to a survey conducted by Refinitiv, analysts expected the company to report earnings per share of $1.12 on revenue of $6.87 billion.

The striking of all was the shift from its long-term goal of adding net users to focus on its existing users. Notably, the company indicated that it will focus on monetizing its current global customer base.

“Moving forward, we will continue to grow our users, but our focus will be on sustainable growth and driving engagement,” PayPal CFO John Rainey said in the earnings call. “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.”

The digital payment platform has over the year struggled with bad actors, who in most cases ends up distracting active accounts.

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

PayPal Stock and the Market Outlook

PayPal stock has been bleeding for the better part of last year and YTD. According to market data provided by MarketWatch, PayPal stock dropped approximately 50.98%, 29.70%, 41.91%, and 31.05% in the past year, YTD, three months, and one month respectively through Tuesday.

Having been rated 49 times in the recent past, the company’s stock market received an average rating of Over. Additionally, the 49 ratings gave an average recommendation of Overweight and an average price target of $198.31.

Recent ratings include Raymond James analyst John Davis, and BTIG analysts, led by Mark Palmer who all downgraded the company’s stock market.

During the earnings call, the company noted that inflation is a major setback and is expected to sustain in 2022. The same observation was reiterated by Wedbush analysts as the company experienced heightened competition from the likes of Block Inc (NYSE: SQ) and Affirm Holdings Inc. Cl A (NASDAQ: AFRM).

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Steve Muchoki

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