PayPal Stock Is Dropping After Beating Earnings Expectations. Blame eBay.

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Updated July 28, 2021 8:49 p.m. ET / Original July 28, 2021 4:35 p.m. ET

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A motion is posted extracurricular of the PayPal office successful San Jose, California.

Justin Sullivan/Getty Images

PayPal banal was tumbling aft the payments institution bushed second-quarter net forecasts but offered below-consensus guidance.

PayPal reported an adjusted nett of $1.15 a share, beating forecasts for $1.13 connected income of $6.24 billion, missing expert estimates for $6.27 billion. PayPal besides said it would gain $1.07 a stock successful the 3rd quarter, beneath estimates for $1.14, portion income guidance of $6.15 to $6.25 cardinal came successful shy of expectations for $6.43

“3Q outlook volition thrust the narrative, with revenues guided ~3.5% beneath Street ests. and EPS ~6% below,” writes Jefferies expert Trevor Williams.

PayPal highlighted the interaction of eBay ‘s modulation to a “managed payments” strategy arsenic 1 root of slower growth. TPV maturation was 40% with eBay, 48% without out, portion income grew astatine a 32% clip without eBay versus 19% with.

“We’re present absorbing much unit from eBay than we had antecedently expected,” CFO John Rainey said connected a telephone with analysts. He added that the institution is “planning for eBay’s resistance connected our gross maturation to beryllium greater than antecedently expected. The resistance volition magnitude to 8.5 percent points of maturation connected 3rd 4th revenue, shaving disconnected $465 cardinal and taking gross to an estimated $6.2 billion.

Mizuho Securities’ Dan Dolev urged investors to instrumentality the longer view. While it’s existent that the “Covid honeymoon whitethorn beryllium over,” helium wrote, referring to PayPal’s phenomenal maturation successful 2020, helium highlighted respective positives successful the net report, including stronger engagement with PayPal’s halfway apps and momentum successful caller initiatives similar “buy present wage later,” which saw 49% quarterly measurement maturation successful transactions.

He besides points retired that PayPal’s boosted its full outgo measurement guidance from 30% to 33%-35% successful the 3rd quarter, 10 points higher than prepandemic levels. “This suggests beardown e-commerce trends and PYPL’s stock gains are present to stay,” helium wrote successful a note.

But expectations for the banal whitethorn beryllium pugnacious to conscionable astatine this juncture, and determination were signs of unit that whitethorn beryllium building.

PayPal, for instance, reported that it’s continuing to spot weakness successful the “take rate” it charges merchants, referring to the payments they marque to PayPal for its services. The complaint fell from 2.21% successful the 4th fourth of 2020 to 2.11% successful the archetypal 4th and 2.01% successful the 2nd quarter. PayPal attributed the diminution to little eBay volumes and declines successful overseas speech fees, but it whitethorn besides bespeak that PayPal is facing much competitory pricing pressure.

Investors don’t look to beryllium successful a forgiving mood. Shares of PayPal were disconnected 5.3% aft hours to $286. Expect much analysts to measurement successful connected Thursday.

Write to Ben Levisohn astatine ben.levisohn@barrons.com

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