Electronic payments company PayPal’s (PYPL) shares tanked 10.5% at close Tuesday after a dismal Q3 print.
The top line missed Street estimates and so did management’s Q4 guidance. The company did outpace Street estimates for adjusted earnings per share, but the beat can be attributed only to a lower tax rate. (See Analysts’ Top Stocks on TipRanks)
What Led to Price Drop
Management expects the transition of eBay to its own managed payments system upon the expiration of the agreement with PayPal to be a near-term headwind looming in Q4.
Moreover, supply chain disruptions and soft spending in the travel/back-to-school space are expected to weigh on payment volumes in Q4.
Management released preliminary guidance for the full year of 2022, which indicates around 18% year-over-year growth in revenues, which is also below Street’s expectations. These points led many investors to shake off PayPal from their portfolio.
Website Traffic Shows Downward Trend
Another interesting piece of data that we came across with the help of TipRanks’s website traffic tool is a sharp drop in visits to PayPal’s website in the current quarter.
We saw that total visits from unique users to the company’s website from all devices sharply declined sequentially by 64.3%, after remaining fairly flat through the first half of the year.
It is interesting to note here that PayPal’s website had experienced a 239.6% spike in website visits from unique users during the Q4 of 2020. Also, the stock price during this period had climbed by 18.9%.
It is possible that last year’s spike was due to increased payments activity as the world was recovering from the pandemic this time last year, and economies were reopening with fresh hope. However, PayPal’s loss of website visitors seems to reflect the headwinds like sluggish travel scene and loss of a big client (eBay).
However, when we looked at this year’s quarter-to-date period and compared it with the corresponding quarter-to-date period of last year, we saw a 10.2% increase in unique visitors to the website.
Again, comparing this year’s to-date period to the same period last year, we noticed that the visits to the company’s website jumped 18.1%.
Analyst Expresses Concerns
Immediately after the earnings call, Needham analyst Mayank Tandon reiterated a Hold rating on the stock. He, however, did not set a price target. “While we view Paypal as a long-term winner in digital payments, the near-term outlook is lukewarm as eBay volumes remain a headwind and travel/back-to-school spending is coming in weak,” he opined.
Tandon also notes that PayPal’s new partnership with Amazon (AMZN) for its peer-to-peer payment service Venmo also doesn’t seem too likely to reflect positively on near-term revenues. For context, PayPal inked a partnership with Amazon in which purchases on the Amazon app can be made via Venmo.
Wall Street Stays Positive
On the other hand, Wall Street analyst consensus is optimistic about PayPal, with a Strong Buy rating based on 23 Buys, three Holds, and one Sell. The average PayPal price target of $286.48 indicates an upside potential of 38.8%.
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Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.
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