PayPal beat expectations, so why did its stock crash Thursday morning?

Shares of PayPal shares (NASDAQ:PYPL) fell out of the gate on Thursday, dropping as much as 11.4%. At 11:51 a.m. ET, the stock was still down 11.3%.

The catalyst that… fintech company lower was the quarterly financial report. Although the results exceeded expectations, the guidance sent a shiver through investors.

A stalled turnaround?

For the fourth quarter, PayPal generated net revenue that rose 9% to $8 billion. This resulted in adjusted earnings per share (EPS) of $1.48, an increase of 19%.

To put this into context, analyst consensus estimates had forecast revenue of $7.88 billion and earnings per share of $1.36, so PayPal exceeded expectations on both counts.

The results were driven by total payments volume (TPV) of $410 billion, up 15% year-over-year and 13% at constant currency. Venmo’s growth was slightly slower, with a TPV of $67 billion, up 8%.

PayPal’s active accounts continued their tepid growth, up 2% to 426 million. The number of monthly active accounts rose 1% to 224 million, but fell 0.6% sequentially. On the positive side, the number of transactions per active account was 58.7, an increase of 14%.

Weak guidance is key

While many would have been happy with the company’s results, it was PayPal’s subpar guidance that prompted some investors to pack up. For the first quarter, PayPal expects net revenue to increase 6.5% to 7% year over year at constant exchange rates. It expects adjusted earnings per share to rise by “mid-single digits.”

Full-year expectations were even more concerning, as management expects adjusted earnings per share to be in line with the $5.10 it generated in 2023.

Dig a little deeper and the culprit is revealed. The fastest growing part of the TPV is the company’s unbranded PSP card…

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