When rumors circulated that PayPal (PYPL) would buy Pinterest (PINS), it foreshadowed major issues ahead. Investors wanted the payment platform firm to address its slowing growth. PayPal later denied it had a deal to buy the social networking site. After it posted weak guidance for 2022, shareholders are in for a rough ride.
PYPL stock slid after it posted revenue growing by 13.1% Y/Y to $6.92 billion. For this year, it expects revenue to surpass $29 billion. EPS will be $2.97 to $3.15. At current levels, the stock is too expensive. Investors could buy Visa (V) or Mastercard (MA). Both firms have a strong network for merchants. It has a better customer support and security layer. Conversely, PayPal may struggle to add merchants to its network. PayPal CFO John Rainey said the company would add 15 million to 20 million net new customers. In addition, it no longer thinks it will add 750 million medium-term accounts.
Your Takeaway
PayPal’s growth is uncertain. Management failed to steer the company in a meaningful way. Its stock price should correct lower. At a big enough discount, value investors might consider starting a position. PayPal will still reach $1.5 trillion in total payment volume. Its business remains strong, while growth could be better.
