In the event of a recession, analysts will like to apply broad-based cuts to PayPal's EPS estimates, which I will also do. Despite a 50% drop in value this year, PayPal's stock still has a P/E ratio of 20x. On average, the market forecasts $4.63 in earnings per share for 2022. PayPal anticipates non-GAAP earnings per share of $4.60-$4.75 this year, assuming no recession. Right now, I would avoid touching PayPal until we see a firm bottom formation indicating the end of PayPal's depressing correction, which has now lasted more than a year. PayPal stock fell another 8.5% yesterday, indicating that investors are becoming increasingly concerned about the possibility of a recession. The departure of the CFO contributed to PayPal's stock approaching its previous 52-week low. While CFOs frequently change positions to pursue new opportunities or promotions in other companies, CFO departures are rarely viewed positively by the company that loses key personnel. John Rainey is leaving PayPal to take a new position at Walmart. Departure Of PayPal's CFOĪfter seven years as CFO and executive vice president in PayPal's Global Customer Operations group, John Rainey is leaving the online payments company.

If economic headwinds worsen in 2022 and a recession becomes more likely, PayPal will have to withdraw its 2022 guidance and lower its NNA guidance yet again. With inflation surging to 8.5% in March and new highs expected in April, recession risks (and consumer spending risks) have risen dramatically in recent months. This number is expected to fall by 59% YoY in 2022 (assuming the top guidance point of 20 million new accounts), indicating slowing net revenue growth that could worsen, particularly if a recession affects consumer spending. Net new active accounts increased 45.7 million on an acquisition-adjusted basis. PayPal expects to add 15 to 20 million net new active accounts in 2022, compared to 48.9 million net new active accounts in 2021. What I mean is that, on an organic level, PayPal's account growth is much weaker than the consolidated numbers indicate, and this could have implications for PayPal's 2022 guidance as recession risks increase. PayPal added an average of 9.35 million new active accounts organically in each quarter of 2019, implying that the 6.6 million organic accounts added in 4Q-21 were 30% lower than the Pre-Covid-19 baseline.Īdding 6.6 million new accounts is no easy task, so I'm not slamming PayPal. Net New Active Accounts From Acquisitions (PayPal) Let's look at PayPal's NNA chart before the pandemic to see how steep the decline in organic net new active account growth is: PayPal's net new active account additions were only 6.6 million on an organic basis. PayPal acquired Paidy, a Japanese BNPL startup, for 300 billion yen ($2.7 billion) in 2021 to add new services. What readers must understand is that the 9.8 million in net new active accounts is not an organic figure: It includes 3.2 million accounts that were transferred to PayPal following the Paidy acquisition last year. Growth in NNA is clearly slowing, with 9.8 million new accounts added in 4Q-21, the lowest level since the pandemic began. During the pandemic, the number of net new active accounts added peaked at 21.3 million in 2Q-20, but NNA growth has since slowed in three of the last four quarters. Net new active accounts count the number of PayPal accounts opened by new customers during a given quarter after deducting accounts that have been closed. The upward trend in PayPal's net new active accounts is especially concerning.

However, the online payments company's account generation has slowed dramatically. PayPal had 426 million merchants and customers by the end of 2021. I believe that PayPal's risks have increased significantly in the last two months as a result of rising inflation rates. The online payments company also reduced its forecast: PayPal expected 18% YoY growth in net revenues prior to the official release of the company's 2022 expectations.

PayPal forecasted 15-17% net revenue growth in 2022 based on spot rates when it released earnings for the previous quarter. Net New Active Accounts Growing Much Slower Than Before The Pandemic PayPal has a risk-adjusted fair value of $60, and I don't believe the stock will rise in the near future. With PayPal's stock already dangerously close to 52-week lows, I believe withdrawing PayPal's 2022 guidance exposes investors to significant risks going forward. ( NASDAQ: PYPL) will lower its net revenue and account growth guidance for 2022. As the likelihood of a recession grows, it is more likely that PayPal Holdings, Inc.

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