Shares of PayPal are down 18% after reporting earnings after the US close today. If that holds, it will open at the lowest since May 2020 tomorrow, near $144.
It's been an absolute swan dive for the shares from $310 in July as the entire payments industry faces a washout.
What's notable to me is a comment from the CFO in the conference call.
Exogenous factors also did impact our results. Supply chain issues disproportionately impacted our cross-border volumes and our small business merchants. Inflationary pressures impacted spending within certain segments of our user base. Rising threats from COVID variants cut travel and event bookings, and the elimination of government stimulus had an impact as well. E-commerce growth rates during the holiday season were lower than industry expectations.
They particularly highlighted a "pullback in spending by lower income consumers" and a soft end to Q4. They also said it has continued into Q1.
"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," they said.
There wasn't a great deal of confidence in improvement, as they pointed to the economy.
"And so when we provide that range of revenue guidance for the year, if this persists and doesn't improve, then it's going to be at the lower end of that range. If it improves appreciably, then it's the upper end of that range. And so if you take the midpoint, we do have some expectation that some of the supply chain issues and inflationary pressures that we've seen right now improve in the back half of the year."
That's some interesting commentary from a company with as good of a view to consumer spending as anyone.
Right now the market is punishing shares of PayPal but if some of those warnings prove correct, many companies will be following them and the US dollar along with them.
