PayPal stock down 21% YoY as rivals slice market share
PayPal Holdings Inc. (PYPL.O) saw its shares drop 7% despite surpassing analysts’ expectations for its earnings report. The drop came as the payment giant forecast flat profit growth for the new year, which overshadowed its strong financial performance.
The newly appointed CEO Alex Chriss detailed a strategic plan to streamline the company in order to drive profitable growth and ease the pressure on its shares, which were among the worst performers on the Nasdaq 100 Index in 2023.
In the fourth quarter, PayPal reported earnings of $1.29 per share, well above the $0.81 per share in the same quarter of 2022 and also up from the $1.18 per share expected by Wall Street. This increase included a 25-cent benefit from the sale of its Happy Returns business to UPS. The company also reported a net revenue of $8 billion for the quarter, exceeding the $7.88 billion anticipated by analysts.
Over the past year, PayPal stock fell by 21%, despite a 2.9% increase in 2024.
Amid competition eroding its core checkout business, PayPal, known for peer-to-peer transfers via Venmo and online checkout services, handles about a quarter of e-commerce transactions. However, the company has been losing market share to rivals like Apple Pay. In an effort to “right-size” its business, PayPal plans to lay off 9% of its workforce this year as part of Chriss’ turnaround plan.
“PayPal is committed to making the necessary changes to our business to drive profitable growth in the years ahead as 2024 is a year focused on execution to position PayPal for long-term success,” said Alex Chriss, who took over as CEO in September 2023.
Despite the challenges, there are regulatory developments that could benefit PayPal. This includes Apple’s recent compliance with a new EU law requiring it to open its iPhones’ tap-to-pay functionality to competitors, including PayPal, in the European Union. This move could enable PayPal to offer tap-to-pay applications on iPhones in certain markets.
On the other hand, PayPal has come under the scrutiny of the U.S. Securities and Exchange Commission (SEC) over its dollar-pegged cryptocurrency. According to a regulatory filing, the payments giant received a subpoena from the SEC’s Division of Enforcement, requesting documents related to its PayPal USD stablecoin.
