PayPal Shares Drop Nearly 6 Percent Amid Warning About Dark Quarter

Shares of PayPal Holdings fell nearly 6 percent in morning trading on Friday after the digital payments heavyweight cut its full-year revenue forecast, warning of a bleak holiday quarter as consumers cut back on discretionary spending.

Decades of inflation have eroded the purchasing power of consumers who must face the threat of an impending recession.

“Consumers have been trading up from high-end, expensive to more affordable while spending more on discretionary products,” Wedbush analyst Moshe Katri told Reuters.

PayPal said low- and middle-income families have started to cut back on non-essential spending, as they face higher food, energy and gas prices.

The company’s cautious comments point to its high exposure and sensitivity to discretionary spending, Katri said.

“Due to the difficult economic environment, slow e-commerce trends and the unpredictable holiday shopping season, we are exercising appropriate discretion in our Q4 revenue guidance,” Chief Executive Daniel Schulman said in a call with analysts.

The San Jose, California-based company on Thursday cut adjusted revenue growth in 2022 to 10 percent from 11 percent previously forecast, while also predicting weaker e-commerce growth in the fourth quarter.

That was in line with comments from the National Retail Federation (NRF), which earlier this week predicted that holiday sales, including e-commerce, will grow at a slower pace this year as retailers offer steep discounts to attract shoppers and clear excess inventory. . .

“IE-commerce remains in a precarious position with declining quarterly trends and an uncertain background, increasing the likelihood that it will not improve significantly next year,” KBW analysts wrote in a paper and lowered their price target on the stock to $95 (approx. Rs. 8,000) from at $115 (approx. Rs. 9,400).

At least 11 other brokerages including JP Morgan, Wedbush and Jefferies cut their price targets after the results.

© Thomson Reuters 2022

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