'Prudent' for PayPal to Downgrade 2021 Outlook: CFO

PayPal’s revenue grew 13% to $6.18 billion in Q3, slightly below the $6.25 billion high point of its July 28 guidance, “as back-to-school sales and travel were weaker than we expected,” said CEO Dan Schulman on a Monday call with investors. PayPal is experiencing “the impact of global supply chain shortages in our merchant base,” and consumer confidence is weakened “with the absence of stimulus payments,” said Schulman. “With the economy reopening, more people may be likely to do their holiday shopping in store, as confidence in delivery logistics is depressed from last year.” PayPal thinks “almost all of these issues are temporal, and consequently, we expect our revenues will accelerate throughout next year,” he said. Travel volume was strong in June and July, “then reversed” in August and September due to concerns about the delta variant, said Chief Financial Officer John Rainey. Though the company is off to a “solid start” for Q4, its growth rate “still remains slightly below our prior expectations,” he said. “Retail supply chain and labor market concerns which may impact the important holiday season have led us to adopt a more cautious stance for the fourth quarter.” Recent days have brought some improvement, but “at this point in time it's difficult to say definitively whether the stronger turns will persist throughout the quarter, or if this improvement is a pull-forward of consumer holiday activity,” he said. PayPal is downgrading its revenue guidance for the year by 0.5% compared with its early 2021 forecast, said Rainey: “But let me be very clear -- our key strategic initiatives are on track and performing very well.” The stock closed 10.5% lower Tuesday at $205.42. Schulman’s “big news” for the day was that Amazon will enable U.S. customers to pay with PayPal’s Venmo mobile payments platform at checkout, starting next year, he said. “This is obviously a very significant moment in our Venmo monetization efforts.” On market rumors that PayPal was pursuing a deal to buy Pinterest, “exploring all potential opportunities to enhance shareholder value is our responsibility,” said Schulman. But “only a select few deals will meet our very strict financial, strategic and capital allocation criteria,” he said.