PayPal stock dropped hard alongside crypto market in Q4—coincidence?

Key Takeaways:

• Global payment giant PayPal’s stock tanked on Feb. 2, after its fourth-quarter report came out.
• Is the company’s crytpo affiliation to blame?
• PayPal executives and analysts list microeconomic factors that influenced the poor Q4 results, and the crypto market didn’t make the cut.

YEREVAN (CoinChapter.com) – PayPal stock (PYPL) tanked over 26% on Wednesday as investors assessed its weaker-than-expected quarterly revenue performance. The losses came in addition to its fourth-quarter losses that coincided with similar declines across the cryptocurrency market.

The synchronous losses alarmed investors, mainly due to PayPal’s growing affiliation with the crypto market since Oct. 2020. In detail, the global payment giant started offering users the option to buy, sell and trade Bitcoin (BTC), Ether (ETH), Litecoin (LTC), and Bitcoin Cash (BCH) via its legacy platform, underscoring crypto’s emerging adoption on Wall Street.

Meanwhile, PayPal also extended the services to its Venmo app users in April 2021. Finally, in August, PayPal U.K. also joined the crypto bandwagon.

PayPal in the crypto race

PayPal’s initial decision to bring its clients closer to the crypto market might have stemmed from the necessity to uphold competition with Square, a crypto-leaning financial services company. According to 2021 statistics, users downloaded Square’s Cash App at almost twice the rate of PayPal’s Venmo.

Additionally, Square declared $8 billion in revenue from processing Bitcoin transactions through the first nine months of 2021. But the costs to process those transactions amounted to nearly $7.9 billion, which leaves a very slim gross margin.

Also read: Cash App launches Bitcoin gifting feature for the holidays. 

Interestingly, PayPal was a profitable company before it took on crypto payments. The latest quarterly revenue performance brought its annual total to $25.4 billion for 2021, a 15% year-to-year improvement. However, the company’s stock (PYPL) has not been optimistic since the December crypto crash.

PYPL stock under pressure

PayPal’s stock has been declining since Oct. 2021 and has lost over 50%. PYPL traded at $132.50 a share on Feb. 3, after dropping an additional 26% in the wake of the Q4 report.

While the correlation between PYPL and the crypto market seems erratic, other crypto-related companies like Square (SQ) and the largest Bitcoin-holding company MicroStrategy (MSTR) faced similar problems.

Notably, despite the 15% increase, PayPal missed expectations for its holiday quarter, and total payment volume came in below estimates. Hence the stock faced sell-off pressure.

Also read: MicroStrategy comes back for more Bitcoin—MSTR drops 5.40%. 

Peter Schiff, a veteran investor and an avid crypto skeptic jumped on the opportunity to blame Bitcoin for the fallen stocks.

However, PayPal’s Chief Financial Officer John Rainey pointed at several microeconomic factors that could have influenced the stock price and lower expectations for 2022.

The company is feeling a sting from inflationary pressures, weaker consumer sentiment, and the supply crunch, and it’s seen a more pronounced impact on spending among lower-income customers.

commented the CFO.

Also read: Ethereum correlation with the U.S. equities hit record high as ETH holds $2.5K-support.

The global market faced pandemic-related challenges in the past two years.

Hence, the crypto plunge is hardly a significant factor in the PYPL lagging stock price. During the COVID-19 pandemic, PYPL soared against the increased demand for mobile payments. However, Mizuho analyst Dan Dolev called the Q4 report a “return to Earth.”

The analyst also added that he saw “notable positives” in the coming year for PayPal.