PayPal (PYPL.US) Q4 performance disappointed, Wall Street says short-term pressure, long-term depends on execution of transformation

Due to underperformance in the fourth quarter, weak guidance for 2026, and continuous market share loss (especially in the brand checkout business), PayPal's stock price plummeted by over 20% on Tuesday, hitting a new low since 2017. Wall Street analysts also expressed disappointment. Macquarie analyst Paul Golding said in a research report to clients, "The performance this time is disappointing. In the background of a weak macroeconomic environment, increasing competition and poor execution have together led to the decline in performance. The management of the company specifically pointed out during the conference call that the middle-class users are the core group of PayPal's brand, and the consumption behavior of this group is particularly weak." Golding pointed out challenges in the brand checkout service, frequent operational and deployment issues, weak retail demand from low- and middle-income consumers in the United States, slowing growth in the German market, as well as declining growth rates in categories such as tourism, cryptocurrencies, gaming, and ticketing, which collectively resulted in the fourth-quarter performance falling short of expectations. Excluding the impact of exchange rates, the total amount paid in the brand checkout business only grew by 1% year-on-year, a significant slowdown from the 6% growth in the same period last year. BTIG analyst Andrew Harte stated that PayPal fell short of various performance indicators in the fourth quarter. In addition, the performance guidance for the 2026 fiscal year is extremely pessimistic, "far from the market's general expectations, which also clearly reflects the company's continued market share loss." BTIG also pointed out that currently PayPal is losing market share in both brand and non-brand payment solutions. Harte stated that the disappointing performance highlights the increasingly intense competition in the e-commerce payment industry. With current business activities accelerating towards online, companies are actively seizing e-commerce development opportunities. In this arena, non-public companies such as Stripe and Adyen have demonstrated their operational strength on a large scale. Meanwhile, consumers have more payment choices than ever before, including Apple Inc.'s Apple Pay and dozens of other digital wallets, while Block's Cash App user activity continues to rise. "Based on the expected free cash flow yield for the 2026 fiscal year of 15%, PayPal's current valuation is significantly low," Harte said, "but investors still find it difficult to establish confidence in its long-term prospects." Interim CEO of PayPal, Jamie Miller, also admitted that the company had underestimated the operational and implementation challenges faced in creating a modern payment experience for merchants, and the difficulty of driving changes in consumption habits for around 400 million active users exceeded the company's initial expectations. This puts the new CEO of PayPal, Enrique Lores, who will take office in March, facing a daunting challenge. Evercore ISI analyst Adam Frisch pointed out that although the CEO transition was expected, it happened earlier than anticipated. Frisch wrote in the research report, "Despite the new executive's impressive background and good reputation, the core concern in the market is whether he will build a strong payment business team once again embark on a company transformation journey lasting several years, or start evaluating options for disposing of PayPal's strategic assets." In a statement to shareholders, PayPal said, "Enrique's joining will help the company accelerate the pace of strategic execution, making us more execution-oriented and disciplined in the process of implementing core strategic goals, driving the company into the next growth cycle." Interim CEO Miller also said, "PayPal is embarking on a new chapter of development, and we have reached a high consensus on the company's future development path." PayPal's statement said, "We will strive to create a top-notch user experience in the industry, including promoting biometric login methods, expanding the application scope of the new payment interface, optimizing payment interfaces to prioritize displaying PayPal options, and strengthening product attraction through reward programs, buy-now-pay-later services and the PayPal app."