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Why PayPal Holdings Inc. Stock Fell 10% Thursday

By Daniel Sparks - Feb 1, 2018 at 2:31PM

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It was a good quarter. But investors have some concerns.

What happened

Shares of financial-technology company PayPal (PYPL 0.70%) fell as much as 10.1% Thursday, following the company's fourth-quarter earnings release on Wednesday afternoon. The stock is down 6.3% at the time of this writing.

Though PayPal's fourth-quarter revenue and earnings per share came in ahead of consensus analyst estimates for the two metrics, guidance for full-year revenue was slightly below expectations. In addition, online marketplace eBay (EBAY 1.48%) said on Wednesday that it has plans to stop using PayPal as its back-end payments service in 2020. But eBay did say it worked out an agreement for PayPal to at least be an option to pay at checkout on eBay until July 2023.

A mobile phone using Venmo Checkout to buy apparel.

PayPal's Venmo Checkout. Image source: PayPal.

So what

PayPal reported fourth-quarter non-GAAP revenue of $3.71 billion and non-GAAP earnings per share (EPS) of $0.55. These compared to expectations for non-GAAP revenue and non-GAAP earnings per share of about $3.63 billion and $0.52.

In 2018, PayPal expects full-year revenue to be between $15 billion and $15.25 billion, below a consensus analyst estimate for revenue of $15.26 billion. 

Now what

With PayPal's guidance for its first-quarter revenue to increase 20% to 22% and for full-year revenue to rise 15% to 17%, management is clearly optimistic about its growth opportunities. Importantly, management also expects this growth to carry over to its bottom line. PayPal guided for non-GAAP EPS for 2018 to be between $2.24 and $2.30, up from $1.90 in 2017.

As far as eBay's agreement with PayPal, PayPal president and CEO Dan Schulman put it in a positive light. "I am very pleased to announce that PayPal and eBay have signed a term sheet to make PayPal available, as a way to pay on eBay, through July 2023," Schulman said.

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Stocks Mentioned

PayPal Holdings, Inc. Stock Quote
PayPal Holdings, Inc.
$70.33 (0.70%) $0.49
eBay Inc. Stock Quote
eBay Inc.
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