SAN JOSE, Calif.–A fintech that has been aggressive in the payments space and that was named in one recent survey as consumers “most trusted” financial partner has seen a sharp decline in revenues.
Shares of PayPal fell 16.7% to $146.40 in premarket trading after gaining 2.2% during regular trading hours one day earlier when the company reported a fourth-quarter profit of $1.11 a share, missing forecasts for $1.12 a share, on sales of $6.92 billion, topping estimates for $6.89 billion. PayPal also said that it expected to earn between $4.60 and $4.75 a share in fiscal 2022, below forecasts for $5.25.
“PayPal was one of those companies that rode the crest of the COVID-19 wave. However, it is now coming back down to Earth as the world opens back up—it is not alone, we have seen the same with the likes of Netflix and Peloton,” said Amrit Dhami, thematic analyst at GlobalData. “Not only is ecommerce no longer the only option for consumers, but a host of macroeconomic crises are hiking up costs for businesses worldwide. However, this does not explain why PayPal has fared so much worse than others in the digital payments and mobile wallets space, like Klarna and Visa.
‘Once Ruled The Roost’
“PayPal once ruled the roost in online payments, catalyzed by its partnership with ecommerce giant eBay. However, their split has hit PayPal’s revenues hard,” Dhami continued. “Quite simply, eBay doesn’t need PayPal anymore thanks to open banking (where banks open up data for regulated providers to access). Giving third parties access to banks’ infrastructure has been an important step in shifting the ownership of customer data from traditional banks to the customer.”
PayPal CEO Upbeat
The company’s CEO, however, has been much more upbeat.
“2021 was one of the strongest years in PayPal’s history,” said Dan Schulman. “We reached $1.25 trillion in [total payment value, or] TPV and launched more products and experiences than ever before. The future is moving in our direction, and we are investing in our consumer and merchant capabilities to seize the opportunity in front of us.”
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