PayPal, Hit by eBay's Plan to Ditch Its Services, Gives Downbeat Earnings Forecast

PayPal on Tuesday forecast first-quarter revenue and profit well below expectations, as it prepares to take a hit from eBay Inc's ongoing move to ditch its payments services, sending its shares down 17.4 percent.

PayPal's operating agreement with eBay has ended and the online marketplace's transition to its own payments platform is impacting transaction volumes.

eBay's transition is expected to put $600 million (roughly Rs. 4,500 crore) of revenue pressure in the first half of this year, Chief Executive Officer Dan Schulman said on a conference call with analysts.

"In the second half of the year, I look forward to being able to stop adjusting for eBay, and letting the strength of our core results speak for themselves," Schulman added.

After spending more than a decade under eBay's fold, PayPal was spun out of the e-commerce marketplace operator in 2015.

"Paypal missed on their bottom line and their guidance came in light, that's a double whammy," said Jeff Tomasulo, chief executive officer of Vespula Capital Management.

"Many of these stocks have been pushed up for years and have had very high valuations, so once they start to show cracks investors bail."

Revenue growth is expected to slow even further in the current quarter, with PayPal projecting a 6 percent rise, far lower than the 11.7 percent growth estimated by analysts, as per IBES data from Refinitiv.

PayPal processed a total of $340 billion (roughly Rs. 25,49,440 crore) in payments in the quarter, up 23 percent from a year earlier, while its peer-to-peer payment service Venmo processed a total of about $61 billion (roughly Rs. 4,57,400 crore) in payments.

The San Jose, California-based company added 9.8 million net new active accounts during the past quarter, including 3.2 million accounts from the acquisition of Paidy, the Japanese buy-now-pay-later firm it bought in September.

As a result, its total revenue rose 13 percent to $6.9 billion (roughly Rs. 51,730 crore) in the fourth quarter and it earned $1.11 (roughly Rs. 80) per share - with both numbers largely matching estimates.

© Thomson Reuters 2022