PayPal Holdings reported a mixed end to the fourth quarter and soft outlook for 2022. The company shocked Wall Street with guidance that badly missed views and new strategic objectives when it reported fourth-quarter earnings. Earnings and total payment volume came in below analyst estimates. PayPal 2022 profit guidance and its outlook for customer growth missed as well. In addition, PayPal abandoned five-year financial targets.
Total payment volume rose 23% in the fourth quarter, slowing from a 33% growth pace for all of 2021.
„For the quarter, our guidance contemplated generating about 12.9 million net new actives [accounts] on an organic basis. We had a slower-than-expected finish to the year and came in below our target,” PayPal CFO John Rainey said on a Tuesday evening earnings call.
PayPal added 9.8 million net new active accounts in the fourth quarter.
PayPal expects to add 15 million to 20 million net new active monthly users in 2022, missing street estimates of 53 million. In 2021, PayPal added 45.7 million active users organically. It ended the year with 426 million active users, up 13% from a year earlier.
Rainey pinned the shortfall on several factors.
„First, the more muted into the year for e-commerce growth driven by both supply chain challenges, as well as pullback in spending by lower-income consumers affected consumer growth. Second, in the back half of the quarter, we also changed course on some of our customer acquisition strategies, including incentive-led campaigns. And lastly and most impactful to the quarter, there were certain accounts that we disqualified or excluded from our net new active number,” Rainey added.
Analysts were also disappointed on the outlook for new accounts.
„PayPal now expects only ~15-20 million net account adds in FY22 vs. our 55-60 million expectation with a return to pre-pandemic trends of ~30-40m per year thereafter. This net account guidance is about half of its previous guidance set on its February 2021 analyst day through 2025 with PayPal turning its focus to higher engaged accounts and raising average revenue per user,” explained Deutsche Bank analyst Bryan Keane.
„The shocker: management abruptly shifted its focus from driving user growth to driving ARPU (average revenue per user) growth, abandoned its 2025 goal of 750 million users, and will focus instead on increasing engagement among the on-third of PayPal users that drive the vast majority of the company’s revenues,” said Lisa Ellis, analyst at MoffettNathanson.
PayPal has evolved from online checkout to mobile shopping and person-to-person payments. Competition has heated up with Block, formerly called Square, and others.
At Susquehanna, analyst James Friedman said: „PayPal is pivoting its strategy to focus more on engagement, but less on net new actives. The new approach sounds sensible to us as many of the new accounts proved less productive.”
Banking 4.0 – „how was the experience for you”
„So many people are coming here to Bucharest, people that I see and interact on linkedin and now I get the change to meet them in person. It was like being to the Football World Cup but this was the World Cup on linkedin in payments and open banking.”
Many more interesting quotes in the video below:
