PayPal (PYPL) stock plunged as the company reported a decline in payment transactions, despite earnings beating on both the top and bottom lines.
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PYPL was down more than 7% in pre-market trading ahead of the open on Wall Street after reporting Fiscal fourth quarter earnings of $1.19 per share, beating estimates for $1.12.
While earnings topped estimates, growth in “branded” payments was short of expectations, putting pressure on the stock, while overall Q4 payment transactions decreased 3% to 6.6 billion.
PYPL Revenues Beat
More encouragingly, net revenue of $8.37 billion beat the consensus for $8.26 billion. Total payment volume increased 7% to $437.8 billion, while transaction margin dollars rose 7% to $3.9 billion.
“We set out at the beginning of 2024 to narrow our focus, improve execution, and reposition the business,” commented President and CEO Alex Chriss. “One year later, I’m proud that we’ve laid a strong foundation for long-term, profitable growth across the company’s most important areas.”
He referenced improvements in the Branded Checkout, peer-to-peer payments and bill-splitting mobile payments app Venmo.
However, there are concerns about Branded Checkout, which is a way to customize PayPal’s checkout page to match a business’s branding.
Mizuho analyst Dan Dolev, who rates PayPal a Buy with a price target of $100, suggested weakness in this area, with branded growth of 6% coming in short of expectations, could be to blame for the stock decline.
He told Barron’s that that “the health of the Branded Checkout button is the heart of the debate around the future of PYPL.”
PYPL’s Fiscal 2025 Outlook
In addition to announcing a $15 billion stock buyback program, PYPL offered clues to its current Fiscal year 2025. The company anticipates adjusted earnings per share (EPS) between $4.95 and $5.10, slightly ahead of the $4.90 expected by analysts. For the first quarter it expects EPS of $1.15-$1.17, versus the consensus $1.13 pencilled in by analysts.
Is PYPL Stock a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on PayPal stock based on eleven Buys and ten Holds assigned in the past three months, as indicated by the graphic below. The average PYPL price target of $97.28 per share implies 8.68% upside potential.
