PayPal Holdings (NASDAQ: PYPL) reported its fourth-quarter and full-year 2021 results last week, following which its shares plunged more than 17% on February 2. The technology platform and digital payments company failed to satisfy the market’s expectations in Q4 as it missed consensus earnings estimates while providing tepid guidance for Q1 of 2022.
Investors these days have almost zero tolerance, even for minor disappointments. The termination of PayPal's operating agreement with eBay (NASDAQ: EBAY) and revenue pressure amounting to $600 million in the first half of 2022 due to the company’s transition to its own payments platform did not impress Wall Street. So, is PayPal stock a buy, given it's down 59% from all-time highs?
Key Financial Numbers for PayPal in Q4 of 2021
In the final three months of 2021, PayPal added 9.8 million net new active accounts, including 3.2 million accounts from the acquisition of Paidy, a Japanese buy-now-pay-later firm it had acquired back in September.
But during this period, the company also witnessed one of the smallest revenue and transaction volume hikes it had seen in the last two years. PayPal’s total payments volume (TPV) had grown by just 23% to $339.5 billion between October to December 2021, primarily since its former parent company eBay Inc had started moving away from its payment offerings. Excluding eBay, it recorded a 27% growth in its TPV, which is still lower than that of 2020. For the whole of 2021, its TPV grew by 33% to $1.25 trillion.
PayPal’s revenue for the last quarter rose by 13% to $6.9 billion, translating to earnings per share of $1.11 per share along with a 38% year-over-year growth in the free cash flows of $1.6 billion.
In the year-ago period, PayPal earned $1.08 a share on sales of $6.12 billion and generated close to $1 billion in free cash flows. In 2021, PayPal increased sales by 18% and generated $5.4 billion in free cash flows.
In 2022 PayPal expects to grow its TPV and revenues to $1.5 trillion and $29 billion, respectively. Besides, it also intends to add 15-20 million net new active accounts and generate $6 billion in free cash flows during the year.
Is it all Bad for PYPL stock investors?
While PayPal disappointed investors in Q4, it achieved significant milestones in 2021. The company fully rolled out its new digital wallet across the globe. It is a widely accepted digital wallet across North America and Europe and has onboarded 1,500 retailers on its platform that now accept digital tokens. Moreover, its partnerships and expansions with numerous top-performing global enterprise merchants like Roku (NASDAQ: ROKU), Oracle (NYSE: ORCL), Instacart, and others might benefit the company in the coming times.
According to PayPal’s CEO, Dan Schulman, in addition to the eBay exit, exogenous factors such as inflation and supply chain disruptions may impact cross-border payments, leading to a deceleration in top-line growth.
PayPal is a leading player in the fintech space and the sell-off in its stock provides investors with a buying opportunity. The company aims to notch 750 million active accounts on its platform by 2025. To achieve its lofty goals, PayPal continues to expand its product portfolio, such as launching a high-yield savings account that will facilitate the trading of cryptocurrencies on its platform.