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Key Takeaways
- PayPal shares fell after the digital payments company issued weaker-than-expected guidance for the first quarter and full year amid a company transformation.
- The company posted fourth-quarter earnings that surpassed analysts’ expectations due to a strong holiday season.
- The PayPal share price may find support around $46.50 from the lower trendline of a descending channel if a deeper earnings retracement occurs over the coming weeks.
PayPal Holdings, Inc.
Source: TradingView.com.
Shares in digital payments giant PayPal Holdings, Inc. (PYPL) tumbled 8% in after-hours trading Wednesday after the company issued a weaker-than-expected outlook as it undergoes a transformation to drive future growth.
The San Jose, California-based company said it projects first-quarter earnings growth in the mid-single digits, whereas analysts had expected 8.7%. For the full year, the payments giant forecasts earnings of $5.10 per share, falling short of the $5.48 consensus figure.
“We’re driving significant transformation across our company and are committed to making the necessary changes to our business to drive profitable growth in the years ahead, PayPal’s CEO Alex Chriss said in the earnings statement. “It will take time for some of our initiatives to scale and move the needle,” he added in a post-earnings call.
Nonetheless, both the top- and bottom-line figures surpassed Wall Street’s expectations in the fourth quarter due to a bumper holiday season. The company posted adjusted earnings of $1.48 per share, ahead the $1.36-a-share analysts had expected. Revenue of $8.03 billion increased 9% from a year earlier and nudged ahead of the $7.87 billion consensus mark. Another bright spot included the company’s adjusted operating margin for the period, which came in at 23.3%, representing a 39 basis-point increase from the prior year’s December quarter.
The company’s earnings report comes a week after it unveiled plans to slash 9% of its global workforce, joining a growing cohort of other big tech firms readjusting staffing levels after a hiring spree during the pandemic. The payments giant also recently announced six new artificial intelligence (AI) tools to streamline the checkout process and provide retailers with new promotional options to target consumers.
PayPal shares recently broke above a 12-month descending channel and the 200-day moving average on increasing volume but have since failed to gain further upside traction. An earnings-driven sell-off creates a potential bull trap pattern that may lead to further declines as investors reposition. In coming weeks, monitor the channel’s lower trendline, which currently sits around the $46.50 level, as potential area of chart support.
Shares of PayPal were 8% lower at $58.18 Wednesday evening.
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