PayPal (NASDAQ:PYPL) stock is sinking 9% as of this writing after the firm estimated that its profit would be flat this year compared with 2023. This news is troubling some investors and has spurred Morgan Stanley to cut its price target on PYPL stock. A number of other analysts have also lowered their price targets on PayPal shares in response.
For 2024, PayPal expects to generate earnings per share, excluding some items, of $5.10. That’s unchanged from the EPS the company reported for 2023.
New PayPal CEO Alex Chriss is looking to cut the fintech firm’s costs going forward. However, Chriss says that it will “take time for some of our initiatives to scale and move the needle.”
PYPL Stock: Guidance, Q4 Results and Price Target Cuts
During the fourth quarter, PayPal’s total payments volume jumped 15% versus the same period a year earlier to $409.83 billion. Meanwhile, its U.S. revenue increased 8% year-over-year (YOY) and its international revenue, excluding currency fluctuations, climbed 12% YOY. Importantly, PayPal’s earnings per share, excluding certain items, also rose 19% YOY to $1.48 per share.
On a negative note, however, active accounts dropped by 2% YOY.
Morgan Stanley responded to the fintech giant’s results and guidance by reducing its price target to $62 from $66 per share. The bank also kept a “hold” rating on PYPL stock. Meanwhile, Citi trimmed its price target on the name to $73 from $76 and Evercore ISI lowered its price target to $55 from $65 per share.
Why It Matters
I’ve heard many pundits and analysts say that companies with new CEOs often provide conservative guidance in order to enable their new leaders to be viewed positively when financial results beat low expectations. PayPal could be following that pattern. Over the long term, value investors may want to watch PayPal’s progress to determine whether that is the case here.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
