PayPal Q4 Profit Seen Climbing Despite Economic Challenges

Firm could overcome inflation and economic headwinds to post profit and revenue gains

PayPal logo on smartphone

S3studio / Contributor / Getty Images

Key Takeaways

  • PayPal will likely report adjusted EPS of $0.85 vs. $0.68 for the prior-year quarter.
  • Revenue could climb by 6.7% to $7.4 billion, the slowest pace of growth in several quarters.
  • PayPal is at risk of losing market share dominance as rival platforms gain popularity.

PayPal Holdings Inc. (PYPL), the world's largest online payment processor, will probably say net income jumped by more than a fifth in the fourth quarter after the company limited costs in a difficult economy.

PayPal's net income for the final three months of 2022 rose more than 22% to $979 million, or 85 cents per share, from the same period a year earlier, according to analysts' estimates compiled by Visible Alpha. Revenue could rise 6.7% to $7.4 billion, a record for the company. Still, sales growth has decelerated over the last several quarters as the company faces a saturated market.

Inflation and concern about a recession hindered wage growth and depressed discretionary spending in recent quarters, prompting the company to cut 7% of its workforce, or 2,000 employees, in January. CEO Dan Schulman cited a "challenging macroeconomic environment."

PayPal's troubles could extend beyond the economy to the increasingly competitive payment processing space. A growing field of rivals threaten PayPal's dominance and could eat away at the firm's market share of almost 44%. Those concerns prompted Raymond James analysts to downgrade PayPal stock to market perform from outperform in early February.

PayPal shares shed almost a third of their value in the last year, compared with a 12.1% drop for the S&P 500 Information Technology Index.

One-Year Total Return for S&P 500 Information Technology Index and PayPal
Source: TradingView.
PayPal Key Stats
  Estimate for Q4 FY 2022 Actual for Q4 FY 2021 Actual for Q4 FY 2020
Adjusted Earnings Per Share ($) 0.85 0.68 1.32
Revenue ($B) 7.4 6.9 6.1
Active Customer Accounts (M) 435.7 426.0 377.0

Source: Visible Alpha

The Key Metric: Active Customer Accounts

PayPal defines active accounts as those registered through one of its platforms or partners that have completed a transaction in the last 12 months. Active accounts are a measure of PayPal's ability to continue to grow and are linked to other important metrics like total payment volume.

PayPal's active account growth decelerated in recent quarters. Analysts predict one of the slowest paces of growth for the final three months of 2022, as active accounts are forecast to improve by just 2% year-over-year.

Article Sources
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  1. CNBC. "PayPal to lay off 2,000 employees in coming weeks, about 7% of workforce."

  2. Zippia. "20 PayPal Statistics + Facts [2023]: How Many People Use PayPal?"

  3. Visible Alpha. "Financial Data."

  4. CNBC. "Raymond James downgrades PayPal, cites concern over potential market share decline."

  5. PayPal Holdings Inc. "2021 Annual Report," PDF Page 135.

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