PayPal Holdings
disappointed analysts and investors alike with its weak guidance for 2024.
The stock plunged 9.1% to $57.44 on Thursday after the payments-technology company reported better-than-expected fourth-quarter earnings but said it expects to post adjusted earnings in 2024 roughly in line with profit of $5.10 in 2023. Analysts had been calling for 2024 earnings of $5.51 a share, according to FactSet.
Coming into the session, PayPal stock had dropped 19% over the past 12 months, compared with a 22% gain for the
S&P 500.
The earnings report follows the announcement last week that the company would be laying off 9% of its workforce to cut costs. PayPal offers payment services to businesses and consumers, but it faces stiff competition from
Apple
and
Alphabet’s
Google unit, both of which offer their own payment platforms.
Analysts at J.P. Morgan led by Tien-tsin Huang lowered their price target on PayPal to $70 from $75, while maintaining an Overweight rating on the shares. They now see 2024 transaction growth of just 0.5%, compared with a previous estimate of 2.8%.
“Management set a low bar,” they said in a note. “We expect pressure on the stock as estimates come down, but appreciate that management is clearing the year for upside as strategic priorities are enacted.”
Susquehanna analysts led by James Friedman said they now see 2024 payments growth at 7.4% versus a previous estimate of 8.1%. They now expect adjusted earnings per share of $5.10, down from their previous call of $5.26. Susquehanna rates the stock at Neutral with a $65 price target.
Seaport analyst Jeff Cantwell wrote that the recently announced cost savings “feel incomplete to us.”
“All this chaos is leaving us with a deeper appreciation for Tom Cruise, as PayPal increasingly looks to us like ‘Mission: Impossible’—but potentially, without the usual uplifting ending seen in those movies,” Cantwell wrote in a note. He has a Neutral rating on the stock.
Others were more upbeat. Citi analysts wrote, “We are taking advantage of the near-term volatility, but beyond that, the attractive valuation and persistent market-relevance of the PayPal flywheel keep us interested.” They rate PayPal stock at Buy with a $73 target price.
Wedbush is also optimistic for the shares, with a Buy rating and price target of $85. “While guidance isn’t ideal, we were encouraged by some of the actions already undertaken by management,” they said.
The Truist team led by Andrew Jeffrey also rates the shares at Buy, with a $70 price target. “We continue to believe that the company occupies an enviable e-commerce position,” they wrote.
Write to Brian Swint at brian.swint@barrons.com
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