Digital payments platform PayPal, Inc. (NASDAQ: PYPL) shares has been battered brutally on both a slowdown in its top and bottom line magnified by the sell-off in the benchmark indexes. The e-commerce business has shown signs of retracement in its business as it lowered guidance for fiscal 2022. The Company saw the pandemic accelerate its business as the Company surpassed $1 trillion in total payments volume growing its active accounts to 426 million including 34 million merchants in 2021. However, the reopening trend has caused a slowdown by the latter part of the year as indicated by its fiscal Q4 2021 earnings miss despite the COVID-19 Omicron variant surge. Supply chain disruption impacted results notably for cross border transactions for small business merchants in addition to inflationary pressures on consumers. With shares trading down nearly (-60%) off its highs, Prudent investors seeking exposure in this leading digital payments platform can look for opportunistic pullbacks to scale into a position.
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Q4 20221 Earnings Report
PayPal reported its Q4 2021 earnings for the quarter ended December 2021 on Feb. 1, 2021. The Company reported earnings-per-share (EPS) profits of $1.11 versus consensus analyst estimates for $1.12, missing by (-$0.01). Revenues grew 13.1% year-over-year (YoY) to $6.92 billion beating $6.89 billion consensus analyst estimates. The Company added 49 million net new active accounts for a total of 426 million active accounts with a record 5.33 billion transactions for the quarter. Transactions per active account rose 11% to 45 as the Company generated $5.4 billion in annual free cash flow.
PayPal cut guidance for fiscal Q1 2022 EPS of approximately $0.87 falling way short of consensus analyst estimates for $1.16 with revenues expected around $6.4 billion versus $6.73 billion analyst estimates. The Company sees fiscal full-year 2022 EPS between $4.60-$4.75 falling short of $5.26 consensus analyst estimates on revenues of approximately $29.18 billion to $29.68 billion versus $30.03 billion analyst estimates.
Conference Call Takeaways
PayPal CEO Dan Schulman noted how 2021 was one of its strongest years in history as revenue rose 18% for the year to $25.4 billion while its EPS rose 19% to $4.60 surpassing $1 trillion in annual total payment volume ending 2021 with $1.25 trillion in TPV. The Company’s migration to managed payments occurred quicker than anticipated putting $1.4 billion in top line pressure which led to a 700 basis point reduction in revenue growth. CEO Shulman also pointed out that supply chain issues, inflation, and Omicron all combined to impact e-commerce growth for the holiday season. However, he pointed out, “2022 is going to be a year of transformation and investment as we transition from outsized growth, driven by lockdowns during the pandemic and finalize the lapping of eBay’s managed payments transition. EBay’s transition will put an incremental $600 million of pressure on our top line, approximately $400 million in Q1 and $200 million in Q2. In the second half of the year, I look forward to being able to stop adjusting for eBay and letting the strength of our core results speak for themselves. Our growth ex-eBay has consistently been above 20%. And our year-over-two-year growth rates have been remarkably stable, again demonstrating the underlying strength of our platform.” CEO Shulman believes that eBay is in a stronger position due to the continued digitization of spending as omnichannel commerce continues to accelerate. He believes the pandemic has bolstered key drivers of its business model shifting more focus towards engagement and higher value NNAs. He did point out that its 2022 forecast was inherently difficult make due to the “unpredictable macroeconomic environment”. The Company is seeing its investments in the Buy Now Pay Later (BNPL) pay off as TPV grew 325% in Q4 with a $13 billion run rate, despite only being available in 8 markets. eBay processed 54 million micro loans for 13 million consumers and 1.2 million merchants using the BNPL services. Venmo revenues rose 80% YoY to $250 million as it continues to start monetizing the app platform.
PYPL Price Trajectories
Using the rifle charts on a weekly and daily time frame provides a precision view of the landscape for PYPL stock. The weekly rifle chart peaked near the $129.86 Fibonacci (fib) level. The weekly inverse pup breakdown has a falling 5-period moving average (MA) falling at $122.71 with a 200-period MA at $156.84 and 15-period MA at $164.25. The weekly stochastic has been smothered under the 10-band for almost five months but is attempting to bounce again. The weekly lower Bollinger Bands (BBs) sit under the 10-band. The weekly market structure low (MSL) trigger attempts on a $108.88 breakout. The daily rifle chart downtrend is stalling as the 5-period MA flattens at $103.55 followed by the falling 15-period MA at $113.81 as stochastic bounces towards the 10-band. Prudent investors can look for opportunistic pullback entry levels at the $100.99 fib, $94.50 fib, $88.84 fib, $86.50 fib, $85.10 fib, $79.42 fib, and the $75.44 fib. The upside trajectories range from the $125.42 fib up towards the $184.35 fib level.