PayPal (NASDAQ) announced Q1 earnings that were in line with analyst expectations. This drove its stock up by more than 22% during premarket trading.

It reported earnings per share of $0.88, and revenue of $6.5 million. The company’s revenue grew by 7% YoY while the total payment volume (TPV), was up 13% compared to last year.

The revenue growth for eBay was not included. It reached 15%. PayPal had 429 million active users during the reporting period. This was a 9% increase QoQ. It is mainly due to a rise in Venmo users.

The financial services firm expects Q2 non GAAP EPS to be $0.86. This is lower than the consensus estimate of $1.12. PYPL anticipates that net revenue will grow by approximately 9% during the period. This figure rises to 14% if you exclude eBay.

PYPL anticipates FY 2022 EPS between $3.81 and $3.93. This is lower than the $4.63 consensus. PYPL also projects FY revenue growth between 11% and 13%, as well as TPV growth rates of 13%–15.

PayPal’s CEO Dan Schulman claimed that PayPal cut its medium term outlook in response to difficulties related to macroeconomic conditions, ecommerce penetration and other factors. Schulman noted that PayPal’s “shareholders expect more from us than our track record over the past several quarters.”

According to him, 2022 will be a challenging year because “forecasting normalized consumers ecommerce spending after the pandemic has been overly complicated.”

It is also expected to face headwinds due to its decision not join Russia after the invasion of Ukraine.

Raymond James analyst John Davis says the lowered guidance is “likely final cut.” The analyst remains cautious as near-term catalysts are still unclear.

“While this appears draconian, the downward revision to guidance and the removal of mid-term targets was largely expected by investors and provides a more realistic baseline for forward expectations. Still, we note PYPL will be a show-me story throughout FY22 and with the stock trading at ~19x our updated FY23 estimates, we await greater confidence that estimates will ultimately prove conservative and thus believe the stock will be range bound in the near to medium term,” Davis wrote in a client note.

Citi analyst Ashwin Shirvaikar says that PYPL stock trades higher despite lowered guidance as “investors can believe the new estimates are achievable.” The analyst lowered the price target to $120.00 per share from $140.00.

“Our numbers and target are lower, but investors with a multi-quarter timeframe should certainly do more work on PYPL at current levels,” Shirvaikar wrote in a note.

By Senad Karaahmetovic