This is Why PayPal Had its Worst Ever Trading Day This Week

American multinational financial technology company PayPal saw its shares tumble hard on Wednesday after the company provided weak guidance that it blamed in part on inflation.

The stock closed down 24% on Wednesday, marking it the worst trading day ever for the company.

In an interview with CNBC, PayPal CEO Dan Schulman said the company took “a measured approach” to guidance, but expects revenue to accelerate in the second half of the year.

PayPal additionally missed user growth targets due in part to 4.5 million “illegitimate” accounts that joined the platform.

For the fourth quarter, earnings per share of $1.11, ex-items, missed the $1.12 expected. The company did however beat on revenue estimates, though, reporting $6.92 billion vs. $6.87 billion expected, according to Refinitiv.

PayPal said it expects first-quarter non-GAAP earnings per share of 87 cents, while analysts had been projecting $1.16. It also said revenue would grow about 15% to 17% for full-year 2022, on a spot and foreign currency-neutral basis. Analysts expected year-over-year revenue growth of 17.9% for 2022.

CEO Schulman has pointed to challenges including the transition of former owner eBay to its own payments platform and “exogenous factors” like inflation bringing down consumer spending and supply chain issues “disproportionately impacting” cross-border payments.

PayPal also missed user growth targets due in part to 4.5 million “illegitimate” accounts that joined the platform, which “affected our ability to achieve our guidance in the quarter,” CFO John Rainey explained.

Canaccord Genuity Capital Markets analysts, reiterated a buy rating on the stock but lowered their price target from $315 to $215, noting that PayPal’s challenges are mainly “short-term headwinds.”

“While the pace of growth in net new accounts is expected to moderate in 2022, we are seeing a steady increase in user engagement metrics and expect to see more marketing behind driving engagement in 2022,” the Canaccord note read. “And already PYPL has shown that it remains nimble despite its size in exploiting rapidly emerging opportunities: scaling an impressive Buy Now Pay Later (BNPL) offering and launch of equity trading.”

BTIG analysts downgraded the stock to neutral and removed their $270 price target, and in a note Tuesday said that PayPal is now a ”‘show me’ story.”

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.