Analysts reveal PayPal stock price targets after earnings
On Jan. 17 Alex Chriss made a bold promise.
Appearing on CNBC, Chriss, who recently took over as PayPal's (PYPL) president and chief executive, addressed the less-than-stellar comments the online payments company had been receiving from a number of Wall Street analysts.
"To be honest, there hasn't been a lot to celebrate over the last few years," Chriss said. "I love being the underdog. I'll take that feedback, and we'll shock the world."
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Shocking the world is a big statement in the financial sector, even for a venerable internet company like PayPal, which got started in 1998.
Elon Musk was involved in the company's creation when the future Tesla (TSLA) CEO co-founded the online banking service X.com, which later merged with Cofinity to form PayPal.
(Musk would go on to buy Twitter and change its name to X, but that's another story.)
Meanwhile, PayPal was sold to eBay (EBAY) in 2002. Twelve years later, the online auction site said it would spin off PayPal into a separate company.
Dan Schulman was the company’s president and CEO from 2015 to 2023. In August, PayPal said that Criss, a senior Intuit executive, would take over.
And on Jan. 25, the new CEO unveiled PayPal's "next chapter," which would expand the company's use of artificial intelligence to provide such features as a faster checkout experience and AI-personalized merchant recommendations for customers.
Image source: Shutterstock/TheStreet
PayPal's guidance falls short
Real Money Prso contributor Ed Ponsi noted that while PayPal introduced new tools for merchants and customers to leverage AI capabilities, "rival companies will certainly do the same in the future."
"The online commerce pioneer is besieged by competitors such as Alphabet’s Google Wallet and Apple Pay," he said. "Elon Musk’s X will likely join the fray, perhaps offering online payments and other financial services before the end of this year."
Five days later, PayPal, which also owns Venmo and Braintree, said it would cut 9% of its global workforce, about 2,500 jobs.
"We are doing this to right-size our business, allowing us to move with the speed needed to deliver for our customers and drive profitable growth," Chriss said in a statement.
On Feb. 7, the company reported fourth-quarter earnings of $1.48 a share, beating the FactSet analyst consensus of $1.36.
Revenue totaled $8.03 billion, beating Wall Street’s call for $7.87 billion. A year earlier, PayPal posted earnings of $1.24 a share on $7.38 billion of revenue.
However, PayPal's guidance for the first quarter and full year fell short of expectations.
The company expects full-year earnings of $5.10 per share, missing the $5.48 target that analysts expected.
PayPal estimated first-quarter year-over-year earnings per share growth would fall in the mid-single-digit percent range, compared with the consensus estimate of 8.7%.
During the company's earnings call, Chriss told analysts, "2024 is going to be a transition year, focused on execution to position the business for long-term success."
"Our clear goal is to reshape the company to accelerate profitable growth and margin expansion in the years ahead," he said, according to a transcript of the call.
Analyst: 'Franchise remains strong'
After the earnings were released, several Wall Street analysts cut their price targets on PayPal but still supported the company's turnaround efforts.
Canaccord lowered its price target on PayPal to $80 from $100 and affirmed a buy rating on the shares.
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The firm said that the core PayPal franchise remained strong and growing, and with a renewed focus on the core PayPal value proposition, the analysts expected to see results begin to emerge exiting 2024.
Truist lowered its price target on PayPal to $70 from $73 but reiterated a buy rating on the shares.
The firm said the stock-price decline stemmed from PayPal's 2024 guidance, but this will ultimately "shake weak hands," Truist told investors in a research note.
PayPal's key metrics are "bottoming" while its turnaround gets underway, the firm said.
Piper Sandler lowered PayPal's price tag to $62 from $66 and maintained a neutral rating on the shares.
The firm said that PayPal's operations beat estimates this quarter as payment volume and the transaction take rate exceeded its expectations.
Total Payment Volume, which measures the gross value of payments successfully processed through a payments platform over a given period, grew 15% and was driven by continued momentum internationally and within the unbranded product.
Piper Sandler said guidance for minimal earnings growth in 2024 implies earnings-per-share estimates need to decline about 7% as headwinds against revenue growth emerge in the first quarter.
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