PayPal Execs Say Consumer Spending Is About to Take a Dive
Paypal executives warned during the company’s earnings call with analysts on Tuesday, Feb. 1, that forecasts for revenue and new active users would not be as strong as hoped.
The company expects to add 15 to 20 million new accounts in 2022, down from 48.9 million in 2021, Barron’s reported. Last year, PayPal had plans to double its active accounts to 750 million by 2025. According to Paypal’s fourth-quarter key metrics, the company currently has 426 million active users.
Chief Financial Officer John Rainey said that “the impact of Omicron and the effect of inflationary prices combined with lack of stimulus, is having an impact on spending,” CNN reported. This would be “most pronounced” on low-income users.
“The persistence of inflationary effects on personal consumption, labor shortages, supply chain issues and weaker consumer sentiment have led us to adopt a more cautious outlook,” he continued.
PayPal shares dropped more than 25% after the announcement.
Analysts at Mizuho Americas said in a report on Wednesday, Feb. 2, that the “disappointing” outlook “marks a return to earth” for PayPal “following the Covid sugar rush,” CNN reported.
PayPal CEO Dan Schulman said that small businesses are being affected by supply chain disruptions, CNN added. E-commerce growth rates during the fourth quarter were also not as high as originally expected.
Consumer confidence also took a dip in January amidst growing concerns over the broader economy.
“Looking ahead, both confidence and consumer spending may continue to be challenged by rising prices and the ongoing pandemic,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.
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