Home > Paypal stock tanks on inflation concerns: here is what management said

Paypal stock tanks on inflation concerns: here is what management said

PayPal shares fell more than 25% on Wednesday due to inflation concerns as revealed by company chiefs, according to Fool.com's transcript of the conference call.

Q4 results were mixed, with earnings missing and revenue beating expectations. Revenue went up by 18% to $25.4 billion, but EPS came in at $1.11 against $1.12 expected. PayPal’s annual free cash flow was $5.4 billion.

But despite the company hitting a historic $1.25 trillion in total payment volume (TPV), 2021 proved to be a “difficult year” for the firm, President and CEO Dan Schulman said.

eBay's migration impacted revenue growth, the CEO noted, adding that other exogenous factors to impact Q4 revenue were supply chain issues and inflation concerns.

“Inflationary pressures impacted spending within certain segments of our user base. Rising threats from COVID variants cut travel and event bookings, and the elimination of government stimulus had an impact as well,” he explained.

Our forecast for 2022 is appropriately measured giving — given the difficult comps in the first half and an unpredictable macroeconomic environment.

John Rainey, the company’s CFO and Executive VP of Global Customer Operations added:

“The impact of omicron and the effect of inflationary prices combined with lack of stimulus is having an impact on spending and by extension, our business.”

He said the inflationary concern has been felt most in the lower-income cohorts, with spillage from Q4 into Q1.

“2022 is now off to a slower start than we previously anticipated, and we are taking a more conservative stance on the year,” the CFO added as he tempered projections on revenue and earnings.

PayPal expects its revenue over the next four quarters to grow at an average of 15% to 17%. However, if the highlighted issues persist, the company could look to the lower end of this range. 

“We have an incredible business, but we are not immune to the vagaries of the economy,” he concluded.

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