Venmo owner PayPal is one of the worst stocks of 2022
PayPal will report its first quarter results after the closing bell Wednesday and investors will be looking to see if the company has any better news to share. The outlook isn’t promising. Analysts are expecting fairly sluggish revenue growth — just 6% from a year ago, and year-over-year earnings are also likely to drop sharply.
The company is looking for a permanent replacement. But until one is found, Gabrielle Rabinovitch, PayPal’s senior vice president, corporate finance and investor relations, will be interim CFO.
“PayPal is in an awkward kind of purgatory with John Rainey leaving,” said Andrew Bauch, senior analyst with SMBC Nikko Securities America.
Investors are also nervous that the company may need to lower its outlook again.
“This seems like a situation where current management may need to reset the guidance further in order to set the bar lower for when a new CFO comes in,” said Jordan Kahn, chief investment officer of ACM Funds.
Kahn said his firm sold PayPal shares in January before the last earnings report due to concerns about growth. But he still likes the long-term prospects for the stock and said he’s waiting for the right moment to potentially get back in.
Another concern? Consumers are starting to go back to brick and mortar retailers to shop as fears about Covid subside thanks to vaccinations and less lethal — albeit more transmissible — variants of the virus.
That means that consumers may look to make more purchases with credit and debit cards or cash in physical stores and make fewer digital payments for online shopping, said Christopher Vecchio, senior strategist at DailyFX.
As digital payment rivalry grows, should PayPal do a deal?
PayPal could benefit, though, if Block CEO Jack Dorsey looks to become more involved with Twitter in the wake of Elon Musk’s acquisition. Dorsey used to be CEO of both companies and some believe that a distracted Dorsey was good for PayPal.
“If Dorsey were to become a part-time CEO who was back at Twitter, that could help PayPal and open up the door for them to gain ground,” Vecchio said.
Kahn agreed that Dorsey focusing more on Twitter would be “great for PayPal” but he thinks that is unlikely to happen. Which means PayPal will have to work harder to revitalize user growth.
The question is whether PayPal investors, which have firmly put the stock in Wall Street’s penalty box, would approve.
But Kahn said the good news is that following this year’s market slide, most fintech companies are in the same boat as PayPal. That means they are all a lot cheaper — and potentially ripe for a takeover.
