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Highlights
- PayPal’s total payment volume increased by 23% YoY in the fourth quarter of FY21.
- The revenue climbed 13% YoY in the same period.
- But it provided weak guidance for the first quarter of fiscal 2022.
Payment processing company PayPal Holdings, Inc’s (NASDAQ:PYPL) weak guidance for the first quarter of fiscal 2022 and its dwindling eBay transactions have left some investors concerned.
The California-based company said that the customer spending growth on its platform slowed in the fourth quarter as people returned to in-person shopping, hitting profit.
Its total payment volume rose by 23% YoY to US$339.5 billion in the quarter, the slowest increase in two years. One of the reasons for the decline has been attributed to the dwindling transactions with the e-commerce firm eBay, the former parent company of PayPal.
eBay's dealings with PayPal have noticeably reduced over the past year affecting growth.
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Why are investors concerned?
PayPal CEO John Rainey said the slow growth was partly due to the muted activity in the e-commerce sector, hit by increasing freight costs and supply chain woes. Additionally, consumers have reduced spending due to high inflation, Rainey said.
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Also, eBay’s declining transactions with PayPal have hit its profits in the recent quarters, deepening investors’ concerns. In the early pandemic days, the e-commerce sector had seen steady growth, accounting for over one-fifth of the total retail spending.
In addition, PayPal’s revenue growth of 13% YoY to US$6.9 billion in the fourth quarter was the lowest increase in two years. The company said the revenue would have increased by 22% if there had been no eBay effect.
PayPal (PYPL) shares plummeted 16.63% to US$146.57 at 7:26 am ET on February 2.
Over the past 12 months, it fell more than 29%.
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PayPal’s user growth
The company said the active accounts on its platform will reach 750 million by 2025.
While increasing spending on marketing campaigns, it has also been adding new products and solutions to its portfolio, such as high-yield savings accounts, crypto trading services, etc. It helped increase the transactions per active account to 45.4 in Q4, it said.
These efforts have also attracted new customers. But the company also said that some 4.5 million accounts currently might have been created illegitimately by people to enjoy the campaign's perks and not intending to be long-lasting PayPal customers.
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This year, the company expects to add only 15 million to 20 million new accounts, a sharp decline from 49 million new accounts in 2021. It plans to ramp up marketing efforts to attract more customers.
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Bottomline
PayPal expects its revenue to increase in the range of 15% to 17% in fiscal 2022, below Wall Street estimates. Its non-GAAP EPS guidance of US$0.87 also fell short of the forecast.
