Paypal cuts annual forecast as spending growth continues to slow

PAYPAL Holdings reduced guidance for full-year performance as volume growth on its platform continued to slow in the first quarter.

The company now expects total payments volume for the year to climb by 15 to 17 per cent, compared with an earlier range of 21 to 23 per cent, according to a statement Wednesday (Apr 27). Revenue for the year is forecast to climb as much as 13 per cent, compared with an earlier target of as much as 17 per cent.

"We have much to be proud of but we know we can continue to do even better," chief executive officer Dan Schulman said in the statement. "We continue to grow faster than the rate of e-commerce."

Spending on the firm's platforms climbed 15 per cent in the first quarter to US$323 billion. While that was in line with the average of analyst estimates compiled by Bloomberg, it was the smallest increase in at least 5 years.

PayPal's volume growth has been challenged in recent quarters as its former parent company eBay more rapidly moves away from its platform, and as more consumers return to in-store shopping. The company's also contending with supply-chain dislocations affecting e-commerce shopping and once-in-a-generation levels of inflation in the US.

In February, PayPal said it was pivoting away from a previous strategy of trying to add millions of new users. Instead, it is seeking to encourage existing customers to use its app more frequently. Weeks later, PayPal was dealt another challenge when chief financial officer (CFO) John Rainey announced he'll leave in the coming weeks to join Walmart as the retailer's CFO.

So far, the new strategy appears to be working: Transactions per active account jumped 11 per cent in the quarter to 47. That helped buoy revenue, which jumped 8 per cent to US$6.5 billion, beating the US$6.4 billion average of analyst estimates compiled by Bloomberg.

Adjusted earnings for the year are likely to be US$3.81 to US$3.93 a share compared with an earlier range of US$4.60 to US$4.75, after US$2.2 billion in stock-based compensation expenses and US$1.6 billion in payroll taxes, PayPal said. BLOOMBERG