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Why PayPal Stock Dropped Today

By Joe Tenebruso – Jul 29, 2021 at 5:21PM

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The loss of a key customer weighed on the fintech leader's profits.

What happened

Shares of PayPal Holdings (PYPL -1.89%) fell 6.2% on Thursday, following the release of the digital payment giant's second-quarter results. 

So what

PayPal's net revenue jumped 19% year over year to $6.2 billion, fueled by an 11.4 million increase in active accounts and a 40% surge in total payment volume (TPV). Adjusted earnings per share, however, rose only 8%, due in part to a 1.7 percentage point decline in its operating margin.

A downwardly sloping stock chart.

Investors sold off PayPal's shares on Thursday. Image source: Getty Images.

Results were dented by eBay's (EBAY -1.34%) transition off its payment platform. The loss of the popular online marketplace's business resulted in an 8 percentage point hit to PayPal's payment volumes during the quarter. "We're now absorbing more pressure from eBay than we had previously expected," CFO John Rainey said during a conference call with analysts. 

Now what

PayPal warned that eBay's migration off of its platform would continue to hurt results in the coming quarters. Management forecast revenue and EPS of roughly $6.2 billion and $1.07, respectively, in the third quarter. That was below Wall Street's expectations of $6.4 billion in revenue and $1.14 in EPS. 

Still, the long-term growth story remains intact. With more retail sales shifting online every day, PayPal's position as a leading provider of digital payment solutions should serve its shareholders well in the decade ahead.

"Our platform now supports 403 million active accounts, with an annualized TPV run rate of approximately $1.25 trillion," CEO Dan Schulman said. "Clearly PayPal has evolved into an essential service in the emerging digital economy."

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends PayPal Holdings. The Motley Fool recommends eBay and recommends the following options: long January 2022 $75 calls on PayPal Holdings and short October 2021 $70 calls on eBay. The Motley Fool has a disclosure policy.

Stocks Mentioned

PayPal Stock Quote
$72.23 (-1.89%) $-1.39
eBay Stock Quote
$43.35 (-1.34%) $0.59

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

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