PayPal shares fell more than 10% on Thursday after a downbeat forecast added to uncertainty surrounding the payments giant. While the company posted better fourth-quarter results on most metrics Wednesday, PayPal forecast earnings that came in well below expectations. The company also noticed a decline in its user base. PayPal is known as an innovator in online checkout during the dot-com era. But it faces stiff competition from new players such as Apple Pay and is struggling to dominate e-commerce as online shopping shifts to mobile phones. Line PYPL 1D PayPal’s performance of the day Alex Criss, who took over as CEO last September, admitted that PayPal overhired during the pandemic, lost focus and was doing too much. He called 2024 a transition year and told CNBC in a phone interview that the company remains “conservative” in its guidance. However, investors expect it will take some time for the situation to improve, and while they wait, they are lowering expectations. The average earnings per share estimate fell 5% after earnings, with less than half of analysts recommending the stock a buy, according to FactSet. Just a year ago, two-thirds of analysts were bullish on PayPal. “While we appreciate the energy that PYPL’s new management brings to the table, for those of us who have documented the last two years in detail, it should come as no surprise that turning around the titan that is PYPL will be no small feat,” Wells Fargo analyst Andrew Bauch said in a note to clients. “Show Me” Stock PayPal’s CEO has come under fire for over-promising ahead of the product’s Jan. 25 event. The company announced plans to make checkout faster using artificial intelligence, calling it PayPal’s “next chapter.” This was the first big announcement from Chris, who came to PayPal from Intuit. Ahead of this, Criss told CNBC that PayPal plans to “shock the world.” Subsequent products were perceived by many as unsatisfactory. Gordon Haskett analyst Don Bilson told clients the CEO didn’t shock the world: “more like putting them to sleep.” “His honeymoon officially ended yesterday due to an unforced communication error,” Bilson said. “The oversight that sent stocks crashing on Thursday is clear. [to] This is the company’s presentation, where Criss gave investors insight into the most “impactful innovations” the company is testing. … PYPL’s presentation came as no shock as it did not announce any new products or initiatives.” During PayPal’s conference call Wednesday, executives outlined their savings plan and ways to speed up its ordering offerings. As part of this, PayPal laid off 9% of its workforce at the end of January to “drive greater focus and efficiency.” We will include this in our future recommendations.” During an hour-long call with analysts, he talked about gaining trust from the investor community. “As a company, we will restore our reputation for meeting our obligations,” Criss said. Bank of America described 2024 as a “transition year” as PayPal invests some of these recent cost savings. Company analysts expect the “turnaround will likely take time.” They cut their price target $2 to $64 with a neutral rating Deutsche Bank calls PayPal ‘show me the stock’, watch progress,” said Brian Keane, an analyst at Deutsche Bank. “The good news is that the new CEO is handling the problems well, but the question remains whether the problems can be solved or is the company structurally damaged?” — CNBC’s Michael Bloom contributed to this report.
