PYPL stock rises as Mull analysts lower 2022 forecast as ‘compensating event’

Analysts wonder if the worst is over for PayPal Credits (PYPL) following March quarter earnings that hit Wall Street targets and lowered 2022 guidance. PYPL stock rose on Thursday after hitting a fresh 52-week low ahead of its first-quarter earnings release. .

After the market closed Wednesday, the e-commerce company said March quarter earnings were 88 cents per share, down 28% from a year earlier. Revenue rose 7% to $6.5 billion, San Jose, Calif.-based PayPal said.

Analysts had expected PayPal earnings of 88 cents per share on revenue of $6.4 billion. A year earlier, PayPal earned $1.22 per share on sales of $6.03 billion. PayPal lowered its 2022 forecast for earnings per share, revenue and total payment volume.

Analysts are wondering if the forecast drop marks a “compensating event” that could renew investor interest in the payout stock.

“The reset was necessary to make the stock investable, but distinguishing between conservatism and fundamental pressure will be difficult in the near term,” Jefferies analyst Trevor Williams said in a note to clients.

PYPL stock: slowing customer growth
PYPL stock rose 3.2% to 85.23 in early trading on the stock market today. In Wednesday’s regular session, PYPL stock hit a new 52-week low.

“The pace of first-quarter revenue is positive, as is – hopefully – the guidance reset,” Mizuho Securities analyst Dan Dolev said in a statement. “However, with the slowdown (in customer growth), disappointing Venmo stats, and questions regarding the future of the payment button, we believe management has some explaining to do.”

Amid concerns over customer growth, the e-commerce company said it added 2.5 million consumer accounts in the first quarter, bringing its total to 429 million.

During the March quarter, the total volume of payments processed by merchant customers increased 13% to $323 billion, as estimated. Analysts had forecast a total payment volume of $322.6 billion.

PayPal stock holds a relative strength rating of just 4 out of the best possible 99, according to IBD Stock Check.

For 2022, PayPal predict revenue growth in a range of 11% to 13% compared to previous forecasts of 15% to 17% growth.

PayPal stock plunges in 2022
“Despite a generally strong first quarter, PayPal sees an overall more muted outlook for e-commerce, declining cross-border POS, macro pressures and spending going forward,” Susquehanna analyst James Friedman said in a report. “But with the network’s revelations already showing a slowdown in e-commerce, those headwinds may have already been priced into stocks.”

Meanwhile, PayPal stock had fallen about 55% in 2022. Shares plunged in February after its 2022 forecast missed estimates and the company abandoned its five-year financial targets.

Also, CFO John Rainey plans to quit the retail giant’s online payment site walmart (WMT).

former parent eBay (EBAY), which founded PayPal in 2015, has nearly finished transferring its payment processing from PayPal to Netherlands-based Adyen.

If you’re new to IBD, consider taking a look at its stock trading system and The basics of CAN SLIM. To acknowledge chart templates for issues such as PayPal shares is one of the key investment guidelines.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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