PayPal plunges 27% as the company issues weak guidance on the back of inflationary pressures

• PayPal's stock sank 27% on Wednesday following disappointing guidance from the payments platform.
• The company projected 2022 revenue growth of 15% to 17% compared with a previous view of 18%.
• The stock dropped to its lowest price since May 2020.

PayPal stock sank to a 21-month low Wednesday after the payments platform trimmed its financial forecast, citing the impact of inflation.

For 2022, PayPal now sees full-year revenue growth of 15% to 17%, lower than the company's projection of 18% issued in November.

"The persistence of inflationary effects on personal consumption, labor shortages, supply chain issues, and weaker consumer sentiment have led us to adopt a more cautious outlook," said CFO John Rainey on an earnings call late Tuesday, according to a transcript.

Shares dropped as much as 27% to $129.01, hitting their lowest price since May 2020. Volume was heavy with more than 58 million shares exchanging hands.

PayPal also reported mixed fourth-quarter results. Revenue increased by 13% to $6.92 billion from a year ago, surpassing expectations of $6.87 billion from a Refinitiv survey of analysts. Adjusted earnings rose by 4% to $1.11 a share, but just missed Wall Street's target of $1.12 a share.

"We were bracing for an underwhelming outlook, and what management communicated was broadly disappointing, but probably necessary to reset expectations in order to get back to beating and raising expectations," said JPMorgan analyst Tien-Tsin Huang in a note Wednesday.

"Lowered outlook implies a much higher view on [average revenue per unit], as PayPal is making a surprise pivot to focus on quality versus quantity of users," said Huang. JPMorgan cut its price target on PayPal stock to $190 from $272 and held to its overweight rating.