Please ensure Javascript is enabled for purposes of website accessibility

Why PayPal Holdings Inc. Stock Fell 10% Thursday

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

PayPal Holdings, Inc. Stock Quote
PayPal Holdings, Inc.
PYPL
$70.33 (0.70%) $0.49
eBay Inc. Stock Quote
eBay Inc.
EBAY
$42.28 (1.48%) $0.61

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
311%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.