Hey fellow regards
I see this question popping up everywhere so I thought I’ll give you a quick explanation why it dumped to even a 52 week low
Summary :They beat revenue, they beat EPS and they raised their guidance. It trades at 15x earnings which is fairly low and even below the S&P average.
So what happened?
It’s because of Braintree a fairly new payment service. It allows a single checkout system for customers to use any payment such as credit card, Apple Pay, PayPal … others.
Paypal disclosed that significant transaction payment volume growth from unbranded site such as Braintree grow by 30%. PayPal branded grow by only 6.5% YOY.
If you want to buy something online and the merchant use Braintree, PayPal has to compete directly with the other payment options Braintree offers ( Apple Pay, credit card, google pay)
PayPal margins on Braintree through each transactions are lower compared to if only PayPal was available without Braintree. This is why smart money dumped their bags immediately. PayPal said margins will eventually pick up again as unbranded structures such as Braintree will grow into medium & small size business.
Investors however were worried to see a 450 BPS increase in expenses due to Braintree and other unbranded processes anchors. That’s why PayPal earnings were very confusing to many while earnings looked great the stock was going completely other way and violent volatile.
So basically investors are worried about a permanently depress of PayPal margins & growth rate.
GL HF fellow regards
TL;DR: The stock dropped because investors are worried about PayPal’s margins being permanently depressed due to the growth of unbranded payment processing (such as Braintree).
You’re an idiot if you think PayPal is a good investment. They are losing market share to competitors and their margins are being squeezed. Don’t be fooled by the earnings beat, it’s not going to last.