Update On PayPal’s Third Quarter 2021 Report

PayPal’s stock price tanked more than 20% after its third quarter 2021 earnings report, and things haven't gotten much better with coronavirus Omicron worries being pumped by media outlets. The stock market can be ruthless at times. Nevertheless, PayPal revenue grew 13% year-over-year to $6.18 billion in Q3 2021 -- a far slower pace than in recent years.


Here are three reasons why.

  1. PayPal management said travel and back-to-school spending were lower than anticipated during the summer and early autumn months.

  2. eBay spun off PayPal as a separate business back in 2015. eBay now has its own digital payments solution that it’s transitioning its customers too.

  3. PayPal is lapping a boom in e-commerce spending last year that was boosted by pandemic stimulus checks.


Here is why it’s not that bad


For one thing, eBay now represents less than 4% of PayPal’s total revenue. Granted, lost business is lost business. However, starting next year, PayPal’s Venmo will become a payment option on Amazon.com. In addition, Walmart now accepts PayPal, and gas stations like Phillips 66 and Valero have QR codes to accept Venmo digital payments too.


In other words, PayPal is making a jump from just an e-commerce payments provider, to a more widely accepted payment option for in-person as well.


Management expects an 18% increase year-over-year in revenue for the full year of 2021. The preliminary expectations for 2022 is for roughly 18% growth as well. Lapping a stellar year like PayPal had in 2020 with online spending sprees is never easy. However, PayPal is still growing, and for a long-term investor, a double-digit percentage decrease in stock price is a normal event for a growing business. Individual stocks are volatile.


PayPal remains a core holding in our growth stock portfolio here at Concinnus Financial after the Q3 2021 update.


Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual. Our investment philosophy takes a forward-looking approach that may not transpire. The economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Investing involves risk and you may lose your principal.

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