On a polarizing stock, PayPal earnings are not without debate

In the wake of PayPal Holdings Inc.'s most recent earnings report, the stock appears to be polarizing again.

‍

The company announced Thursday afternoon that it was beating profit expectations, gave an upbeat earnings outlook, and announced that CFO Dan Schulman would retire in 2023, instead of forecasting revenue. Analysts couldn't agree on the positivity or negativity of several of these items.

‍

PayPal's stock price following earnings may reflect split views. In premarket trading Friday, PayPal shares were swinging between very slightly positive and negative gains following four of the company's previous five earnings reports.

‍

A 9% revenue growth is expected for the first quarter, according to the company's outlook.

‍

Trade Algo Analysts were not satisfied with the revenue breadcrumbs. In response to PayPal's commentary on revenue expectations and its disclosure that total active accounts are not expected to grow this year, he wrote, “we expect branded checkout to grow in the low single digits on a currency-neutral basis,” which will likely accelerate the share-loss narrative.

‍

“While the [mid-single-digit revenue] guidance may be overly conservative given the wide macro slowdown, our analysts still expected FY23 EPS of $4.87 (versus $4.79 on average),” the analysts added. 

‍

The stock was downgraded to market performance ahead of the report by our analysts.

‍

Rather than focusing on pure user growth, PayPal's management has been deemphasizing the net-new-active metric over the past year in order to make better use of its most active users, and on Thursday, PayPal introduced a new monthly-active metric.

‍

Wedbush's Moshe Katri believes PayPal's management team "clearly" addressed worries about share loss and spending patterns that had dogged the name prior to the report. Davis remains concerned about market share losses in branded checkout.

‍

Schulman also discussed his plans to retire at the end of the year, though he said the timing would be determined by the outcome of the search.

‍

“In recent years, Dan has been able to grow PYPL materially. However, given recent/post-pandemic volatility, the change may remove some of the overhangs for some investors. 

‍

Over the last year, PayPal shares have declined 34%, while the S&P 500 has declined 9%.