What happened
PayPal Holdings (PYPL 0.64%) beat analyst expectations and raised its full-year guidance. But investors were more focused on the company's concerns about a difficult operating environment up ahead, sending shares down as much as 12% on Tuesday.
So what
PayPal has evolved from a fintech darling to a "show me" stock for skeptical investors, and the company's most recent quarterly results did little to settle the ongoing debate about the stock.
The company reported first-quarter earnings of $1.17 per share on revenue of $7.04 billion, easily beating Wall Street's expectation of $0.98 per share in earnings on sales of $6.2 billion. PayPal also guided for second-quarter earnings of $1.15 to $1.17 per share, well ahead of the $1.04-per-share consensus estimate.
For the year, PayPal expects to earn $4.95 per share. The consensus estimate is $4.36 per share.
PayPal reported $354.5 billion in total payment volume in the quarter, up 10% year over year or 12% when adjusted for currency fluctuations. Payment transactions were up 13% to 5.8 billion.
Now what
So what's not to like?
Despite the upbeat guidance, PayPal is growing cautious about the economy. The company reduced its full-year 2023 operating margin expansion view from 125 to 100 basis points, due in part to the strength of lower-margin unbranded checkouts.
"Even with the strong start, there remain many challenging issues to navigate as we look forward," CEO Daniel Schulman said on the post-earnings call. "Both the macroeconomic and geopolitical environments are complex and difficult to predict."
Shares of PayPal are down more than 75% from their 2021 high, and investors are still waiting to see how well the company makes the transition from high-growth start-up to more-established tech giant. The most recent quarter provided hints that PayPal is moving in the right direction, but there are still enough reasons for concern that investors aren't inclined to rush in and buy the shares.
