The market is rerating the one-time growth juggernaut that is payment giant PayPal (PYPL).
PayPal shares plunged about 25% to $133 in afternoon trading as the company reported a mixed end to the fourth quarter and soft outlook for 2022.
Total payment volume rose 23% in the fourth quarter, slowing from a 33% growth pace for all of 2021. Non-GAAP operating margins fell 291 basis points from a year ago.
“For the quarter, our guidance contemplated generating about 12.9 million net new actives [accounts] on an organic basis. We had a slower-than-expected finish to the year and came in below our target,” PayPal CFO John Rainey said on a Tuesday evening earnings call.
PayPal added 9.8 million net new active accounts in the fourth quarter.
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Rainey pinned the shortfall on several factors.
“First, the more muted into the year for e-commerce growth driven by both supply chain challenges, as well as pullback in spending by lower-income consumers affected consumer growth. Second, in the back half of the quarter, we also changed course on some of our customer acquisition strategies, including incentive-led campaigns. And lastly and most impactful to the quarter, there were certain accounts that we disqualified or excluded from our net new active number.,” Rainey added.
Here is how PayPal performed compared to Wall Street estimates:
Net Sales: $6.92 billion vs. $6.89 billion
Adjusted Operating Margin: 21.8% vs. 23%
Adjusted Diluted EPS: $1.11 vs. $1.12
For the full year, PayPal said it sees earnings of $4.60 to $4.75 a share. Wall Street analysts had estimated $5.23.
Analysts were also disappointed on the outlook for new accounts.
“PayPal now expects only ~15-20 million net account adds in FY22 vs. our 55-60 million expectation with a return to pre-pandemic trends of ~30-40m per year thereafter. This net account guidance is about half of its previous guidance set on its February 2021 analyst day through 2025 with PayPal turning its focus to higher engaged accounts and raising average revenue per user,” explained Deutsche Bank analyst Bryan Keane.
Keane left his Buy rating on PayPal intact but slashed the price target on the stock to $200 from $260.