PayPal’s spending warning casts pall over upbeat forecast
PAYPAL Holdings forecast full-year profit above Wall Street estimates on Thursday but warned of pressure on discretionary spending, and said chief executive Dan Schulman will retire at the end of 2023.
Macroeconomic pressures have begun to hurt American consumers, particularly those in the lower income bracket, but PayPal’s customers continue to spend largely undeterred by decades-high inflation.
Even so, the company’s upbeat forecast comes alongside its previously announced commitment of lowering expenses in the backdrop of its key e-commerce segment feeling the pinch of a slowdown.
“The rate of e-commerce growth in our core markets has decelerated. Inflationary pressures have affected discretionary consumer spending and post-Covid spending patterns are still evolving,” acting finance chief Gabrielle Rabinovitch said in a call with analysts.
Shares in the payments heavyweight fell 1 per cent in extended trading after results.
In a divergence from prior quarters, PayPal said it will not provide a forecast for full-year revenue growth.
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“They don’t want to call out a revenue number at this point because of the macro uncertainty, they don’t want to put themselves in a box,” D.A. Davidson analyst Chris Brendler told Reuters.
Schulman joined PayPal in 2014 to lead the company, after its separation from eBay the following year.
“Dan’s had notable success in growing PayPal materially over the years, however the change may remove an overhang for some investors given recent/post-pandemic volatility,” Wolfe Research analyst Darrin Peller said in a note.
Shares in PayPal have lost about 66 per cent of their value since 2021, through the stock’s last close.
Last week, PayPal said it will lay off 7 per cent of its workforce, or about 2,000 employees.
PayPal said it expects full-year adjusted profit of roughly US$4.87 on a per share basis. Analysts on average had expected US$4.75 per share, according to Refinitiv IBES data.
PayPal earned a profit of US$1.24 per share on an adjusted basis in the fourth quarter ended Dec 31, beating analyst estimates of US$1.20 per share.
Its revenue rose 9 per cent on an FX-neutral basis to US$7.4 billion. REUTERS
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