PayPal shares fell nearly 6 percent after the company warned of a dismal holiday quarter

PayPal Holdings shares fell nearly 6 percent in morning trading on Friday after the digital payments giant cut its full-year revenue forecast, warning of a bleak holiday quarter as consumers cut discretionary spending.

Decade-high inflation has hit the purchasing power of consumers, who must also contend with the threat of a looming recession.

“Consumers are trading down from high-end, expensive to more affordable brands while spending more on non-discretionary products,” Wedbush analyst Moshe Katri told Reuters.

PayPal said lower- and middle-income households have started to cut back on non-essential spending as they grapple with higher food, energy and gas prices.

The company’s cautious comments point to its greater exposure and sensitivity to discretionary spending, Katri said.

“Given a challenging macro environment, slowing e-commerce trends and an unpredictable holiday market season, we are appropriately cautious in our Q4 earnings guidance,” CEO Daniel Shulman said in a call with analysts.

The San Jose, Calif.-based company on Thursday cut its adjusted 2022 revenue growth outlook to 10 percent from the 11 percent previously forecast, while predicting dismal fourth-quarter e-commerce growth.

That was in line with comments from the National Retail Federation (NRF), which earlier this week forecast holiday sales, including e-commerce, to grow at a slower pace this year, despite retailers offering deep discounts. to attract buyers and clear excess stock.

“E-commerce remains in uncertain territory with trends worsening in the quarter and an uncertain backdrop, raising the possibility that not much improvement will materialize next year,” KBW analysts wrote in a note and cut their price target on the stock to $95 (nearly Rs 8,000 ) from US$115 (nearly Rs. 9,400).

At least 11 other brokerages, including JP Morgan, Wedbush and Jefferies, lowered their price targets after the results.

© Thomson Reuters 2022