PayPal Shares Sink Most in Nearly Two Years as Earnings Outlook Disappoints

Vivek Kumar
Published: Feb 2, 2022, 14:56 GMT+00:00

Shares of digital payments giant PayPal fell to their lowest level in nearly two years following a disappointing earnings outlook.


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PayPal shares slumped over 25% on Wednesday after the leading global payments company reported mixed earnings in the fourth quarter and its outlook for the next quarter disappointed investors.

As eBay prepares to ditch its payments services, San Jose-based company forecast revenue and profit that are well below expectations for the first quarter of 2022. The company anticipates revenue growth of 6% for the current quarter. That is well below market expectations of nearly 12%.

That prompted several equity analysts to slash their one-year price targets. D.A. Davidson cut the price objective to $166 from $275. Deutsche Bank slashed the price target to $200 from $260. BMO lowered the target price to $180 from $224. JPMorgan cut the target price to $190 from $272. Jefferies slashed the target price to $145 from $200. Cowen lowered the target price to $174 from $221.

PayPal (PYPL) reported weaker than expected 4Q21 results and provided a 2022 outlook short of our below consensus estimates. Key metrics were broadly below expectations and macro factors are affecting growth. We are lowering our estimates/PT and expect the shares to be under meaningful pressure at the open,” noted George Mihalos, equity analyst at Cowen.

PayPal stock slumped over 25% to $131.31 on Wednesday. The stock fell over 27% so far this year after plunging more than 19% in 2021. eBay stock too fell nearly 3% to $58.75.

Analyst Comments

“Following another thesis-shaking guide down, we are maintaining our BUY rating, but lowering estimates and slashing our price target from $275 to $166. PYPL was one of the pandemic’s biggest beneficiaries, but now faces brutal comps amid a painful customer loss (eBay). While the dramatic fall from grace is unnerving, we take solace in several key positives beneath the surface that suggest better trends ahead,” noted Christopher Brendler, MD, Senior Research Analyst at D.A. Davidson.

“Although we understand the temptation to give up, we continue to view PYPL as a long-term winner in an attractive sector. Maintain BUY as we see these issues as transitory and expect marked improvement by 2H22 as headwinds fade.”

PayPal Stock Price Forecast

Thirty-seven analysts who offered stock ratings for PayPal in the last three months forecast the average price in 12 months of $213.44 with a high forecast of $310.00 and a low forecast of $125.00.

The average price target represents a 21.41% change from the last price of $175.80. Of those 37 analysts, 27 rated “Buy”, nine rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley cut the base target price to $190 from $217 with a high of $274 under a bull scenario and $155 under the worst-case scenario. The investment bank gave an “Overweight” rating on the digital payments giant’s stock.

“We think investors are probably overly preoccupied by the reduced emphasis on NNA growth, and instead should focus on overall eCommerce growth. We remain Overweight while acknowledging eCommerce market growth normalization could take several qtrs,” noted James Faucette, equity analyst at Morgan Stanley.

Technical analysis suggests it is good to sell as 100-day Moving Average and 100-200-day MACD Oscillator signals a strong selling opportunity.

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About the Author

Vivek has over five years of experience in working for the financial market as a strategist and economist.

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