Why PayPal Stock Is Down By 5% Today

PayPal Stock Dives As Q3 Guidance Disappoints

Shares of PayPal found themselves under significant pressure after the company reported its second-quarter results. PayPal reported revenue of $6.24 billion and GAAP earnings of $1.00 per share, missing analyst estimates on revenue and beating them on earnings.

The company stated that the number of total active accounts exceeded 400 million in Q2 2021, and PayPal processed 4.7 billion payment transactions. PayPal also noted that it repurchased 765,000 shares of its common stock during the quarter.

While second-quarter results were good and the company’s earnings exceeded analyst estimates, the market focused on PayPal’s guidance for the third quarter.

In Q3 2021, PayPal expects to report revenue of $6.15 billion – $6.24 billion and GAAP earnings of $0.68 per share. The main problem for PayPal in the near term is that eBay Marketplace is moving away from PayPal, which hurts guidance.

What’s Next For PayPal Stock?

PayPal stock suffered due to disappointing Q3 2021 guidance, but traders should keep in mind that the negative impact from eBay’s move will be temporary as PayPal’s core business continues to grow.

The pandemic accelerated the shift to digital payments and allowed PayPal to grow its revenue by 19% in the second quarter.

Analysts expect that PayPal will report adjusted earnings of $4.73 per share in 2021, while the company’s own guidance is $4.70 per share. In 2022, PayPal’s profit is projected to grow to $5.89 per share, so the stock is trading at almost 50 forward P/E.

Such multiples are common for high-growth stocks in today’s market environment as traders are ready to pay premium for companies that benefit from trends which were boosted by the pandemic.

Some analysts have even rushed to upgrade PayPal despite the company’s soft Q3 guidance, and the stock has already recovered some of its earlier losses. S&P 500 is currently testing new all-time high levels, and the general market sentiment is very bullish. In this environment, PayPal stock has a good chance to move back to recent highs as its core business growth remains strong.

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