PayPal Stock Crashes 13% Despite Earnings Beat

Shares of PayPal Holdings (PYPL) were tumbling 11% in late-day trading Tuesday, Feb. 4, despite reporting earnings that beat consensus estimates and providing guidance for the coming year that exceeded expectations.

The fintech stock reported revenue of almost $8.4 billion, a 4% increase from the year-ago period, while earnings fell 15% to $1.15 per share on a GAAP basis. However, on an adjusted basis, EPS of $1.19 rose 5% year-over-year. 

Both the top and bottom line beat analyst forecasts of $8.27 billion and earnings of $1.13 per share.

Headwinds Still Causing Turbulence

Despite the seemingly stronger showing, PayPal still has issues. Payment transactions fell 3% though total payment volume rose 7% year over year. 

And though it added 2.6 million active accounts, up 0.6% sequentially, for the full year there were 8.8 million new accounts, 2.6% more. It was less than what analysts were anticipating. 

While it indicates PayPal's turnaround plan is still succeeding as it has stopped the hemorrhaging of accounts, growth is not especially strong.

Yet, the fintech forecasts that it will generate full-year 2025 adjusted earnings of $4.95 to $5.10 per share, ahead of Wall Street consensus estimates of $4.90 per share. 

A Promise Of A Better Tomorrow

The 35 analysts covering PayPal do have a buy rating on its stock and a one-year price target of $89.48 per share, implying 14% upside at lower price today.

It should be noted PayPal had previously warned its fourth quarter results would be soft as its turnaround plans prepare for more profitable growth going forward. Management is being cautious with its guidance and is laying the groundwork for improved growth and margin expansion.

I appreciate management underpromising and managing expectations. While it is hopeful that business will continue picking up as the year progresses, it gives it the chance to overdeliver at the end.

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