February 8-PayPal (PYPL.O) experienced a nearly 9% drop in premarket trading on Thursday after disappointing investors with a flat adjusted profit forecast for 2024. The new CEO, Alex Chriss, outlined a strategic plan to streamline the company and prioritize profitable growth, aiming to alleviate pressure on its shares that ranked among the worst performers on the Nasdaq 100 Index in 2023.
While Chriss’s initiatives are expected to yield positive results over time, Wall Street analysts anticipate short-term pressure on PayPal shares due to the revised 2024 outlook. J.P.Morgan noted that 2024 would be more of a transition year, delaying previously targeted operating leverage. If the losses persist at current levels, PayPal’s stock could lose approximately $6 billion in market value.
PayPal currently trades at a forward price-to-earnings ratio of 11.64, in contrast to rival Block’s (SQ.N) ratio of 21.08, according to LSEG data. Chriss acknowledged the ongoing efforts to drive change both internally and externally, emphasizing that significant initiatives would take time to scale and make a substantial impact.
Morningstar analysts expressed concern about the management’s outlook, suggesting that the path to improving growth and profitability might be longer than anticipated. They highlighted Chriss’s commentary, indicating that PayPal might not see a meaningful improvement in growth or margins in the current year.
In a notable shift from regular practice, PayPal announced that it would no longer provide an annual revenue forecast, further clouding its outlook. Chief Financial Officer Jamie Miller justified this decision, stating, “Given the considerable changes underway at the company, we believe it is prudent to guide revenue one quarter ahead and provide updates as the year progresses.”
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