PayPal (PYPL, Financial) experienced a significant stock drop despite exceeding analysts' earnings forecasts for the fourth quarter. The company's shares fell over 13%, closing at $77.73. A slowdown in the growth of its unbranded card processing business was noted, with total payment volume growth decreasing from 29% last year to 2% in the fourth quarter. This deceleration was attributed to competitive pricing strategies.
Jamie Miller, PayPal's CFO, highlighted potential fluctuations in upcoming quarters, citing ongoing large agreements. The adjusted net income for the fourth quarter fell by 1.9% to $1.21 billion, or $1.19 per share, surpassing the expected $1.13 per share. PayPal has also raised its first-quarter earnings forecast to between $1.15 and $1.17 per share, exceeding analyst predictions.
For the three months ending in December, PayPal and Venmo processed a total payment volume of $437.8 billion, marking a 6.8% year-over-year increase, which exceeded expectations. However, Mizuho Securities analyst Dan Dolev noted that branded checkout growth did not meet some expectations, especially after Visa reported strong e-commerce trends.
BTIG analyst Andrew Harte suggested that high market expectations, rather than structural issues, pressured PayPal's stock. Despite the stock sell-off, he believes the company's fiscal year 2025 guidance is conservative, and future growth opportunities remain debatable.
PayPal plans to streamline operations this year, continuing its focus on efficiency. CEO Alex Chriss aims to refocus the company by investing in branded checkout technology. The board has authorized a $15 billion stock repurchase program, with $6 billion planned for this year. The company also intends to boost profits from Venmo, projecting an annual adjusted EPS of $4.95 to $5.10.
