In Q4 2021, less than one year after setting these ambitious goals, PayPal announced that they would not meet their 750 million user target and estimated to grow accounts by only 15 to 20 million in 2022.įurthermore, they would " evolve their customer acquisition and engagement strategy". You didn't have to wait long for reality to kick in, though: Considering the pace of user growth up until that point, the guidance, especially for the latter years, seemed outrageously optimistic. The company guided to add 50 million new users in 2021, which meant that they believed at the time to average just over 80 million per year from 2022 to 2025. What was that medium-term guidance? If you go back to the February 2021 Investor Day 2021, management gave a target of growing their (at the time) 377 million active accounts to 750 million in five years. Even in Q3 2021, when it became obvious that the company will go through more challenging times and analysts pushed back on management's optimism, the CEO reiterated his confidence:īut if I look at the strength of the core business every single metric is way above, even our forecast is way above our medium-term guidance, and that's kind of like what gives us just a ton of confidence, and we are obviously being, I think appropriately cautious and conservative as we look forward at this time, but I feel like if I look at the what the real part of our business is every metric is trending pretty strongly right now.ĭaniel Schulman, CEO, Earnings Call Q3 2021 Management talked about having "some of the best performance in our history on both an absolute and a relative basis". If you listened to the earnings conference call for Q2 2021 you would not have noticed these problems, though. After riding the wave of booming e-commerce during the COVID-years some early cracks started to show in the numbers. If you go through the recent earnings history you will see things really turned south around Q2 2021 for PayPal when the company missed revenue estimates and gave soft guidance for Q3. Whether PayPal is a good investment or not for the long term, boils down to the question if PayPal's established market power, secular tailwinds, and low valuation can compensate for the current challenges to the business.
Worse yet, there are no signs of a turnaround at this point. At the same time, the actual data that we are getting from the company is getting worse and worse – key business metrics like revenue growth, total payment volume growth, and active user growth have been decelerating for many quarters. It looks like a perfect example of a leading business, whose stock has been unfairly punished by the market, and which could lead to big profits for investors who are willing to bet on a turn-around. PayPal is caught in a whirlwind of COVID normalization, a toughening macro environment, increasing competition, slowing growth, gross margin erosion, and management turmoil. Investors have been vocal about the low valuation of the stock for some time now – yet, the stock cannot catch a break, it seems. Since then, the stock has been on a continuous ride down. However, since mid-2021 the company started to struggle. It was also a big beneficiary of COVID-19, when physical contact was restricted all around the world, and consumers shifted more towards e-commerce and online payments. The business model centers around providing convenient, secure, and reliable payment solutions and the company generates revenues primarily through transaction fees charged as a percentage of the payment amount.įor a long time, PayPal was conceived as the top dog and leader in online payments. This includes online payments, peer-to-peer, mobile, international transactions, payment processing for businesses, etc. PayPal provides payment solutions and financial services to individuals, businesses, and merchants. However, in the recent past, PayPal has struggled, which is more than visible in the stock chart: Data by YCharts For the majority of its existence, PayPal ( NASDAQ: PYPL) has been riding the wave of increasing online payments, with shareholders profiting greatly as the stock seemed to only go one way – up.
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