PayPal Didn’t Shock Anyone. What Should Investors Do Next?

(CTN News) – PayPal (NASDAQ: PYPL) has struggled over the past three years. Ahead of 2024, the stock has experienced negative returns over the past three years, and it has fallen by nearly -75%.

PayPal’s new CEO, Alex Chriss, stated during a CNBC interview that PayPal would “shock the world” at an innovation event it was holding at the end of January.

PayPal’s Artificial Intelligence (AI) ambitions were the focal point of the event, which was not exactly awe-inspiring for investors. In 2024, improving products through artificial intelligence is hardly cutting edge. Following the release of the company’s Q4 results, the stock sold off a couple weeks later.

A history of overpromising and underdelivering

PayPal’s narrative has been that for the last few years it has been a fading business facing competing pressures as it tries to survive. This is by far the biggest risk facing the company, and there is no doubt about it.

In spite of this, the numbers provided by the company do not necessarily reflect this narrative. Over the past three years, the company’s key metrics have consistently grown despite the precipitous fall in its share price over the last three years.

Over the past few years, the amount of money that flows through the company’s payment processing system has consistently risen over the quarters, and the growth rate in this metric has accelerated in 2023 as well.

In addition to the increase in payment transactions, revenue has also grown substantially over the past few years. As things stand now, things haven’t been perfect for the company, as its number of active accounts has slowed in recent years as well.

In recent months, PayPal has come under pressure due to its guidance for 2024. In its Q1 earnings report, the company predicted that revenue growth would be 6.5%, but said it did not provide revenue guidance for the full year. However, it did say that adjusted earnings per share would remain flat at $5.10, as reported in 2023.

So what is the reason why investors didn’t like this idea? In addition, analysts were looking for adjusted EPS of $5.53 for 2024.

A company’s stock performance is often influenced by future projections and how they perform versus expectations, so when a company forecasts earnings below analyst expectations, the stock will fall as a result.

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