Fintech giant PayPal (NASDAQ:PYPL) recently reported its fourth-quarter and year-end 2018 results, and it's fair to say that the market isn't happy with them. While PayPal delivered impressive earnings growth and some impressive figures within its business, one big piece of disappointing news is troubling investors.

Here's a rundown of PayPal's fourth-quarter results, some of the important facts and figures for investors to know, and why the stock dropped 4% following the announcement.

Young woman using laptop.

More people than ever are using PayPal for their e-commerce needs. Image source: Getty Images.

The headline numbers

On the headline numbers, PayPal's results were mixed. The company beat expectations on the bottom line with adjusted earnings of $0.69 per share, 26% higher than a year ago and $0.02 more than analysts had been looking for. However, revenue of $4.23 billion came in just under estimates.

The top- and bottom-line numbers never tell the entire story of how a company's quarter went, though. So let's take a look at the details.

Digging a little deeper: What went wrong?

At first glance, it can be difficult to see any trouble spots in PayPal's earnings report. Just to run down a few of the highlights:

  • PayPal added 38.7 million net active new accounts in 2018, 31% more than it added in 2017. This includes 13.8 million net new active accounts in the fourth quarter -- the most PayPal has ever added in a single quarter.
  • Total payment volume for 2018 was $578 billion, a 27% increase from 2017.
  • The company repurchased $3.5 billion worth of stock in 2018. At the current share price, this translates to 3.4% of the total.
  • Venmo's revenue has climbed to an annualized rate of $200 million. This is still quite low in the context of PayPal's $15.5 billion in revenue for 2018 but is still a very positive sign. Many analysts believe that successful monetization of Venmo is crucial to PayPal's future growth. The company says that 29% of Venmo users have engaged in a "monetizable" experience, compared to 24% in the third quarter.
  • Venmo's payment volume increased by an impressive 80% year over year to nearly $19 billion in the fourth quarter. Not only is this impressive, but it represents an acceleration in growth from the 78% year-over-year growth rate in the third quarter.

With all of that said, there's one major catalyst that's likely dragging down the stock: lower-than-expected 2019 guidance. At the midpoint of its range, PayPal is expecting 2019 revenue of about $17.98 billion, while analysts had been looking for $18.04 billion. PayPal's EPS forecast of $2.84 to $2.91 per share was in line with analyst estimates of $2.88. However, slower-than-expected revenue growth is definitely a disappointment and certainly explains why the stock is sliding.

Is PayPal a buy now?

Generally speaking, I tend to ignore analyst projections when making investment decisions, and that's especially true when a fast-growing company slightly misses growth projections. And keep in mind that even though it was a bit shy of what analysts had been hoping for, PayPal's 2019 outlook still represents 16% year-over-year growth.

The bottom line is that this is still a fast-growing and innovative fintech company, with tons of untapped revenue potential from its Venmo platform as well as lots of growth potential as we gradually transition to a cashless society. In short, don't let a slight disappointment in guidance make you lose sight of PayPal's potential.

Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends PayPal Holdings. The Motley Fool has a disclosure policy.