Shares of the digital payment company PayPal (NASDAQ: PYPL) are on a downtrend, setting new lows as the year progresses. PYPL stock has declined by 77% from its 52-week high. Further, it has decreased by 62% this year alone.
The tough year-over-year comparisons, the drag on its financials from eBay’s (NASDAQ: EBAY) payment migration, macro headwinds impacting consumers’ discretionary spending, and a slowdown in e-commerce growth are why investors dumped PayPal stock.
Now What?
PayPal is concentrating more on driving engagement and retaining high-quality customers that would drive its revenue per active account higher. However, this strategy is still unproven and, in the near term, would hurt net new active accounts growth and lead to higher churn.
Amid challenges, PayPal reduced its TPV (Total Payment Volumes) growth forecast to 13%–15% from 19–22%. The top-line growth rate excluding eBay was lowered to 15%-17% from 19%-21%. Furthermore, PayPal sees its earnings in the range of $3.81-$3.93 per share, down from its previous guidance of $4.60-$4.75.
Further, as the company is now focusing on driving higher revenue per user, it expects to add 10 million net new active accounts, significantly lower than the previous forecast range of 15 to 20 million.
Speaking at the BofA 2022 Global Technology Conference, PayPal CEO, Dan Schulman, stated that the company’s “guidance anticipates things continue to get worse.” He added, “we’ve got a long tough slog for the rest of this year.”
Given the challenges, hedge funds and retail investors have lowered their exposure to PayPal stock. However, most Wall Street analysts are optimistic.
PayPal stock has received 26 Buy, five Hold, and one Sell recommendations for a Strong Buy consensus rating. Further, the average price target of $127.07 indicates 75.4% upside potential from current levels.
PYPL stock sports a Neutral Smart Score of 7 out of 10 on TipRanks.
Bottom Line
The challenging macro landscape and lower net new active accounts could continue to limit the upside in PYPL stock in the short term. However, the diminishing impact of eBay’s transition in the coming quarters, new product offerings, opportunities in the pay later segment, and partnership with Amazon (NASDAQ: AMZN) bode well for long-term growth.
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