Paypal (Nasdaq: PYPL) shares were trading more than 20% higher following the company beating expectations on the top and bottom lines. Following the report, shares were initially lower as the company issued weaker-than-expected guidance for Q4. However, shares recovered along with the indices following a soft CPI report which lifted the Nasdaq nearly 10% in a couple of days.
Overall, Paypal shares are down just over 50% YTD and are down by nearly 75% from it's all-time high in July of last year. The company has been hit by a number of headwinds including demand and growth being pulled forward during the pandemic, a slowdown in online spending, and higher rates leading to multiple compression for tech companies. The company is also slowly losing market share to upstarts like Square (Nasdaq: SQ) and Stripe.
Inside the Numbers
In Q3, Paypal reported $1.08 per share in earnings which was better than expectations of $0.96 per share in earnings. Revenue also slightly edged out estimates at $6.85 billion vs $6.82 billion. Overall, earnings were down by 2% and revenue was up 11% compared to last year.
The company's Q4 revenue forecast also disappointed at $7.4 billion vs expectations of $7.7 billion. However, the stock's swift recovery and surge higher could be an indication that this weakness is already discounted by the stock's decline.
The company did increase its EPS guidance for the full year by a modest amount as it sees increased monetization of its services and offerings and continued growth in transactions. It also forecasts a net addition of 8 million to 10 million new active users in the next year. However, it attributed the weak Q4 revenue forecast to expectations of an economic downturn that would affect online spending. It's also worth noting that most of the company's growth is coming from Venmo.
The company also announced that it's working with Apple (Nasdaq: AAPL) by adding Paypal and Venmo branded credit and debit cards to Apple Wallet. It's also working to allow merchants to accept contactless payments through mobile wallets.