PayPal shares are falling as 2024 forecasts promise to be leaner and more profitable

(Reuters) – PayPal shares fell nearly 9% in premarket trading on Thursday after it forecast flat adjusted earnings through 2024, disappointing investors who had hoped the payments company’s newly appointed CEO would reignite growth.

On a post-earnings call, CEO Alex Chriss laid out a strategic plan to make the company leaner as it strives for profitable growth and ease pressure on its shares, which were one of the worst performers on the Nasdaq 100 Index in 2023 .

Wall Street analysts said the short-term outlook will weigh on the stock, but the new initiatives are likely to pay off and benefit the company over time.

“It is clear that 2024 will be more of a transition year than we expected, with operating leverage more likely to be targeted beyond 2024. We expect pressure on stocks as estimates move lower,” JPMorgan wrote in a note.

At current levels, if losses continue, the stock would lose about $6 billion in market value.

It trades at a price-to-earnings ratio – a commonly used benchmark for valuing stocks, comparing the share price to expected future earnings – of 11.64, compared to rival Block’s 21.08, according to LSEG data.

‘MOVING THE NEEDLE’

“We do a lot of things to drive change both internally and externally. However, nothing happens overnight. It will take some time for some of our initiatives to scale and get moving,” Chriss said during a conference call.

Morningstar analysts say management’s outlook suggests the path to improving growth and profitability will be longer than expected.

“Management’s commentary implied that PayPal will not see meaningful improvement in growth or margins this year,” she added.

PayPal also said…

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