PayPal gives downbeat earnings forecast, shares plunge 17.4%

PayPal's offer carries a 26 percent premium over Pinterest's current share price.

PayPal Holdings Inc on Tuesday forecast first-quarter revenue and profit well below expectations, as it prepares to take a hit from eBay Inc's ongoing move to ditch its payments services, sending its shares down 17.4%.

PayPal's operating agreement with eBay has ended and the online marketplace's transition to its own payments platform is impacting transaction volumes.

EBay's transition is expected to put $600 million of revenue pressure in the first half of this year, Chief Executive Officer Dan Schulman said on a conference call with analysts.

"In the second half of the year, I look forward to being able to stop adjusting for eBay, and letting the strength of our core results speak for themselves," Schulman added.

After spending more than a decade under eBay's fold, PayPal was spun out of the e-commerce marketplace operator in 2015.

"Paypal missed on their bottom line and their guidance came in light, that's a double whammy," said Jeff Tomasulo, chief executive officer of Vespula Capital Management.

"Many of these stocks have been pushed up for years and have had very high valuations, so once they start to show cracks investors bail."

Revenue growth is expected to slow even further in the current quarter, with PayPal projecting a 6% rise, far lower than the 11.7% growth estimated by analysts, as per IBES data from Refinitiv.

PayPal processed a total of $340 billion in payments in the quarter, up 23% from a year earlier, while its peer-to-peer payment service Venmo processed a total of about $61 billion in payments.

The San Jose, California-based company added 9.8 million net new active accounts during the past quarter, including 3.2 million accounts from the acquisition of Paidy, the Japanese buy-now-pay-later firm it bought in September.

As a result, its total revenue rose 13% to $6.9 billion in the fourth quarter and it earned $1.11 per share – with both numbers largely matching estimates.