The digital payments company’s second-quarter margins were weak, overshadowing a positive outlook, and this caused shares of PayPal Holdings to drop by almost 11% on Thursday.
The stock was down to its lowest price since mid-June, trading at $65.29.
The company claimed that tighter underwriting standards for loans and higher provisions in its credit portfolio hurt margins.
Following Wednesday’s market close, the San Jose, California-based company announced second-quarter adjusted operating margins of 21.4%. In the first quarter, they were 22.7%.
In recent months, PayPal’s profit margins have come under scrutiny. While higher-margin companies like the PayPal-branded checkout platform have experienced slower growth, low-margin companies like Braintree have experienced rapid growth.
PayPal released yet another disappointing earnings report, according to Edward Jones analyst Logan Purk. This will support the pessimistic view of investors who believe that PayPal’s concentration on its biggest clients will reduce overall profitability.
Additionally, the business is looking for a new CEO to replace Dan Schulman, who will step down at the end of the year.
Schulman stated on Wednesday that “we are in the very final stages of the process with several outstanding candidates.”
According to J.P. Morgan analyst Tien-tsin Huang, until a leadership change is made and strategic initiatives start to pay off, “which we do not expect for a few quarters,” the stock is expected to remain “range-bound.”
Analysts predict a profit of $1.22 per share, compared to PayPal’s adjusted profit per share range of $1.22 to $1.24 for the current quarter.