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Paypal Beats Earnings Forecasts Again

Shares in iconic payment processing provider Paypal are tanking this week on the back of the company’s Q4 earnings. Shares are now down around 12% from last week’s YTD highs. The fall comes despite Paypal earnings falling nearly enough in line with expectations. EPS came in above forecasts at $1.24 vs $1.19 expected while revenues were just shy of forecasts at $7.383 billion vs $7.389 billion expected. This marked the fourth straight quarter of earnings growth for the company. However, it seems that investors were disturbed by Paypal’s outlook and guidance for the year ahead.
 

US Economic Concerns

In its outlook for the year ahead, Paypal warned of growing downward pressure on US consumer spending. The group noted its main e-commerce business had slowed as a result of excessive inflation and higher costs for consumers. In a sign of the uncertainty the firm is facing, Paypal deviated from its usual practice of offering revenue forecasts for the year ahead. With fears of a forthcoming US recession and the Fed continuing with its tightening program, Payapl shares have slumped into the end of the week in line with the broader drop in risk sentiment and look set to remain weak in the near term. Today’s US consumer sentiment might well exacerbate the sell-off if we see any weakness against current forecasts.
 

Technical Views

Paypal

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The rally in Paypal shares off the 2022 lows has seen the stock trading up to a test of the 87.93 level, briefly breaking above the recent bear channel. However, the move has since reversed and the price is now trading back within the channel, testing the 78.19 level support. This is a key area for the stock and if we break below here, in line with weakening momentum studies, the focus turns to a test of 67.41 support next.

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