Shares of payments giant PayPal had their worst day on record—plunging roughly 25%—after the company issued disappointing revenue and profit forecasts for 2022, citing factors like higher inflation impacting consumer spending.
PayPal’s stock plunged nearly 25% to just under $133 per share after a disappointing outlook —its lowest level since May 2020, a far cry from its record high of $360 per share last year.
The plunge in share price is PayPal’s fastest drop ever, wiping out roughly $50 billion in market value on Wednesday alone.
PayPal reported mixed fourth quarter results late on Tuesday, but what really spooked investors was the company’s weak earnings guidance, with executives admitting that a number of factors will pressure its business in 2022.
The payments company lowered its profit outlook for the current quarter and lowered forecasts for full-year revenue growth to between 15% and 17%, below the 18% expected by analysts.
PayPal, which has seen slower user growth, cited several challenges which will affect results this year, including the impact of higher inflation on consumer spending and ongoing supply chain issues.
The company is also losing business at a faster pace than expected from one of its biggest customers and former owner, eBay, which is in the process of moving to its own separate payments platform.
Several eBay billionaires who hold small stakes in PayPal saw their net worths fall on Wednesday. eBay founder Pierre Omidyar, for instance, saw his fortune drop $3.1 billion to $14 billion, according to Forbes’ estimates. Former eBay CEO and PayPal shareholder Meg Whitman’s net worth fell $600 million to $4 billion, according to Forbes. One of eBay’s first employees and a former president at the company, Jeff Skoll, saw his net worth drop $400 million to $5.2 billion.
PayPal was a pandemic-era favorite stock for investors, with shares surging 111% in 2020 and another 25% in the first half of 2021. The stock has gone downhill since, however, falling 35% in the second half of last year as PayPal’s user growth slows and higher inflation puts a damper on personal spending. PayPal’s market capitalization now sits at $155 billion, down from a peak of more than $360 billion in July 2021.
“PayPal maintained strong growth in terms of payment volumes in the fourth quarter, but other aspects of its results presented a somewhat sour note,” says Morningstar analyst Brettt Horn, who has a $151 per share price target on the stock. “An end to pandemic tailwinds and its eBay relationship could make for somewhat tougher sledding going forward.”