PayPal investors cling to hope for 2023

PayPal CEO Dan Schulman said Q4 revenue is on track and EPS is tracking "slightly ahead."

It's no secret 2022 has not been kind to fintech. However, things could be looking up in 2023, at least for one payments platform. PayPal CEO Dan Schulman gave investors something to cheer after presenting at a UBS TMT conference, sending shares higher though they have since retreated slightly. Meanwhile, Elon Musk is not thrilled with the direction in which the company he helped co-found is headed. 

Schulman said PayPal is on track to deliver 9% revenue growth in the current quarter, as a result of which EPS should come in “slightly ahead” of the company's previous outlook.  Schulman attributes the improved guidance to better-than-expected cost controls. At the current pace of honing costs and growing margins, PayPal’s earnings are set to rise 15% in 2023, with Schulman pointing to a “more elevated end-of-year EPS.” 

Fintech stocks have been out of favour in 2022, and PayPal is among the companies to have taken the brunt of the punishment. Shares have shaved off 61% of their value year-to-date as investors have run for the exits. PayPal currently has 432 million users, but Uncle Sam is targeting the platform. 

The IRS wants Americans to report any business transactions worth at least $600 on third-party platforms like PayPal and Venmo, the latter of which is owned by PayPal, via a 1099-k tax form. This is compared to a previous threshold of $20,000 across 200 or more transactions. 

Meanwhile, free speech proponent Elon Musk recently chimed in on PayPal but didn’t have good things to say.  According to the new Twitter chief, “PayPal seems to be moving in the direction of social credit and censorship,” which he calls “disturbing.” Musk also predicts that the “worse the fiat system becomes, the more cryptocurrencies will grow.” 

PayPal already supports crypto transactions in the US and the UK and has now set its sights on the EU. The company is expanding its footprint to offer crypto services to Luxembourg users, who can buy, sell, or hold four cryptos — Bitcoin, Ethereum, Litecoin, and Bitcoin Cash — on the platform. 

PayPal shares closed up 3 per cent in response to Schulman’s comments on Dec. 7 but have since given back some of those gains. Trader Gareth Soloway noted on Twitter that PYPL shares could see a breakout to the $120 level if the current pattern holds and the stock doesn’t dip below $68. If he’s right, investors will probably have to wait until 2023 for those gains when tax-selling is over.