PayPal Holdings Inc. lowered its full-year 2022 guidance of net revenue growth to around 11%-13%, as the macro environment has deteriorated, CEO Daniel Schulman said during the first-quarter earnings call April 27.
The war in Ukraine and lockdowns in China are contributing to increased global uncertainty and incremental inflationary and supply chain pressures, Schulman said. Revenue generated from China and the U.K. were down more than it was in the fourth quarter, said Gabrielle Rabinovitch, head of investor relations and interim CFO.
PayPal suspended transactional services in Russia following its invasion of Ukraine. While the suspension added an incremental 3 cents of earnings pressure, PayPal delivered non-GAAP EPS of 88 cents in the first quarter, Schulman said.
PayPal cut its revenue guidance by 400 basis points at the midpoint. It was more conservative than Wolfe Research's expectations for a reduction of 200 to 300 basis points, analysts at the sell-side research firm wrote in an equity research report. "Our conversations with investors suggested that a more significant cut to guidance would be welcomed as it could lead to numbers being de-risked and lower the possibility of another cut to [fiscal 2022] guidance," according to the note.
Improving the consumer experience around checkout and digital wallet applications will be the key growth focuses for PayPal.
The payments technology company aims to place its digital wallets, under the brands of PayPal and Venmo, at the center of consumers' daily financial lives. Customers who use its digital wallets transact 25% more at checkout than users not using the app, and over 70% of its buy-now, pay-later users engaged through the digital wallet.
"We clearly believe that's where the future of the industry is going. It's the future of PayPal. It is the heart of what we are trying to do from an engagement perspective," Schulman said. PayPal customers are two times more likely to shop when they see PayPal available as a checkout option, Schulman said, citing consumer surveys.
A smooth checkout experience contributes directly to merchants' sales by ensuring that orders successfully go through. PayPal has the competitive advantage as a trusted brand with an attractive network among merchants, Schulman said.