Shares of PayPal Holdings fell almost 6 percent in morning trading on Friday after the digital payments heavyweight cut its annual revenue forecast, warning of a gloomy holiday quarter as consumers cut back on discretionary spending. .
High inflation for decades has affected the purchasing power of consumers who also have to deal with the threat of an impending recession.
“Consumers have moved from expensive, high-end brands to more affordable brands, while also spending more on non-discretionary products,” Wedbush analyst Moshe Katri told Reuters.
PayPal said low- and middle-income households had started to cut back on non-essential spending as they face higher food, energy and gas prices.
The company’s cautious comments point to its higher exposure and sensitivity to discretionary spending, Katri said.
“Given a challenging macro environment, slower e-commerce trends and an unpredictable holiday shopping season, we are being appropriately cautious on our fourth-quarter earnings guidance,” Chief Executive Daniel Schulman said on a call with analysts.
The San Jose, California-based company on Thursday cut its 2022 adjusted revenue growth outlook to 10 percent from the previously forecast 11 percent, while forecasting dismal e-commerce growth in the fourth quarter.
That was in line with comments from the National Retail Federation (NRF), which earlier this week forecast that holiday sales, including e-commerce, would grow at a slower pace this year, even when retailers offer deep discounts to attract shoppers and remove excess inventory. .
“E-commerce remains in precarious territory with deteriorating trends over the quarter and an uncertain backdrop, raising the possibility that not much improvement will materialize next year,” KBW analysts wrote in a note, lowering the stock price target to $95 (nearly Rs. 8,000) from $115 (nearly Rs. 9,400).
At least 11 other brokerages, including JP Morgan, Wedbush and Jefferies, lowered their price targets after the results.
© Thomson Reuters 2022
