PayPal Drops After Cutting Forecast on Spending Slowdown

tech.hindustantimes.com:

PayPal Holdings Inc. shares fell after the company trimmed its forecast for annual revenue amid a slowdown in spending growth on its platform.

Payments volume on PayPal's platforms jumped 14% to $337 billion in the third quarter, missing the $343.2 billion average estimates from analysts. PayPal said it now expects revenue for the year to jump 10% to $27.5 billion, compared with an earlier forecast of $27.85 billion.

“Clearly, you're seeing discretionary spending under pressure as people spend more and more of their disposable income on gas, food and rent,” Chief Executive Officer Dan Schulman said Thursday in an interview.

Schulman is battling a slowdown in growth in spending on PayPal's many platforms, spurred by the reopening of the US economy in the aftermath of the pandemic as well as once-in-a-generation levels of inflation.

PayPal shares fell about 6.9% in premarket trading before New York exchanges opened. The shares recovered some of their earlier losses on Thursday to close down 3.7% after PayPal announced a deal with Apple Inc.

In response, the company has vowed to reduce expenses -- including through job cuts and the shuttering of offices across the country -- which it has said will result in $900 million in savings this year and $1.3 billion next year. Schulman has been vocal about his plans to improve operating leverage, or the ability to grow revenue faster than expenses.

Costs for the third quarter climbed to $5.73 billion, well under the $5.92 billion average estimate of 9 analysts surveyed by Bloomberg. The company now expects the push to shave expenses will buoy adjusted profit for the year even as it trimmed its forecast for annual revenue.

“We delivered strong third-quarter results,” Schulman