In just a little under a week from now — Wednesday, April 27, after close of trading — fintech giant PayPal (PYPL) is due to report its Q1 2022 earnings. And if you were around to see how the market reacted the last time PayPal reported earnings, that probably has you feeling just the teensiest bit nervous (Hint: The last time PayPal reported earnings, its stock crashed 25% in a day).
Ahead of the print, RBC analyst Daniel Perlin keeps his Outperform (i.e. Buy) rating intact, but lowers his price target from $180 to $118. Not to worry, there’s still upside of 36% from current levels. (To watch Perlin’s track record, click here)
Perlin is not quite so optimistic about what PayPal will report for Q1 2022, as the rest of Wall Street seems to be. Street estimates have PayPal reporting $6.4 billion for the quarter — 6% year-over-year growth — versus Perlin’s prediction of $6.3 billion in revenue (5% growth). At the same time, Perlin believes the Street is unfortunately correct about what PayPal will report for earnings — $0.87 per share, a 29% decline year over year.
Moreover, given trends in consumer spending of late — a shift away from buying goods, which can often be paid for via PayPal, to buying services, for which PayPal is less often used; a less pandemic-bound economy in which more purchases are made in stores (where again, PayPal usage is a rarity); and also a high-inflation world which discourages frivolous purchases of “discretionary” goods (another PayPal forte) — Perlin expects PayPal guide to lower on the rest of this year when it reports earnings next week.
Previously, PayPal had guided investors to expect something on the order of 15% to 17% revenue growth in 2022. Next week, Perlin says investors should expect new guidance to “tilt to the low-end” of that range.
What does that mean in dollars and cents? According to the analyst, after PayPal misses on sales next week, it’s likely to continue missing all year long. Perlin is penciling in $28.6 billion in sales for this year, versus a Wall Street consensus of $29.3 billion. Similarly, fiscal year 2023 sales will probably come up short — only $33.6 billion instead of the Street’s forecast $35 billion.
Likewise with earnings. Perlin has PayPal pegged for $4.53 per share in 2022 profits, and only $5.64 per share in 2023. That’s as compared to Street expectations of $4.63 and $5.78, respectively.
Granted, when push comes to shove, Perlin still thinks PayPal stock is “cheap” at just 16 times his predicted profits for fiscal 2023. But honestly — when you consider that he’s predicting an earnings miss next week, more earnings misses all through 2022, and even more earnings misses in 2023, you kind of have to wonder: Maybe PayPal is just cheap for a reason. (See TipRanks stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.