PayPal (NASDAQ: PYPL) took a heavy beating following another ill-received profits report and forecast revision - but some analysts see the air of pessimism to subside quickly.
Early Monday's flop was the result of a discouraging view of Wall Street analysts who downgraded the stock from "Neutral" to "Sell", citing gloomy regulative headwinds to take shape in Asia and Europe.
A Guggenheim market observer's slashed-down PYPL grade sent the stock crumbling 2.78% to $112.29 during Monday's pre-market trade. Analyst Jeff Cantwell gave the company a price target of $104 per share in Guggenheim's monitoring.
Cantwell thinks Paypal's diminished full-year stock guidance was a "wake-up call" of sorts, and that it will continue to perform below par its payment peers. "We see the stock's lowered guidance for the year as 'unwelcome' ahead of what we predict will be a challenging 2020 for the company," he said.
These "headwinds" include the eBay separation, policy transformations and regulatory-linked dynamics in Europe, and ongoing Brexit controversy, Cantwell wrote in a report. He stressed that the company is guiding for the current year's profits to be in the of $17.7 billion to $17.9 billion range, and these headwinds are seen to affect the company's growth.
Analysts, on the other hand, are expecting for $17.77 billion. In business, the term "headwinds" means situations or conditions that make it difficult for a company to attain growth or consistent sales.
PayPal shares were rallying 30% this year, compared to a 21% return (ROI) for the wider S&P 500. For the long-term, PayPal has been sluggish, climbing just 80% in two years and barely tripling in the next three years.
But following years of considerable growth driven by the popularity of online shopping, last week's profits report seems to have discouraged many investors, prompting the company to cut down its revenue guidance for the full year.
The American global online payments system blamed a delay in product integration and currency for its diminished sales guidance. The setbacks in the stock's pricing initiatives could further hinder its revenue going forward.
PayPal has briefly been the focus of bear pressure of late, just as it did for a rough second quarter after the Q1 earnings for 2019, and has shown its mettle to be a "storm-resistant" brand for its capacity to rebound without being as vulnerable to the general market's volatility.
But none of the above-mentioned scenarios seemed to have mattered much for Wall Street players, who opted to dump the company's shares on earnings day.
