Payment stocks have experienced a significant decline, with several factors contributing to the downturn. The downward trend began on Wednesday when Worldline, a prominent French payments company, adjusted its full-year financial guidance, citing concerns about an economic slowdown in Europe. This announcement had a negative impact on shares of PayPal Holdings and Block, which dropped 5.1% and 8% respectively.
While Thursday saw a slight recovery for both PayPal and Block, with PayPal closing 0.5% higher and Block closing 0.1% lower, Friday brought further decline. On this day, PayPal and Block stocks were down by 2.2% and 3.3% respectively.
According to Daniel O'Regan, a managing director at Mizuho Securities, today's decline can be attributed to three main factors: the lingering effects of the Worldline announcement, concerns about consumer spending slowing down, and increased competition from Apple as it expands its presence in the buy-now-pay-later sector. All of these factors are posing challenges to the payment industry in the short term.
Investors are eagerly awaiting PayPal's third-quarter earnings report, scheduled for release on Wednesday. This report will shed light on whether PayPal's outlook aligns with Worldline's pessimistic view.
O'Regan emphasized that investors will be closely monitoring the stability of PayPal's core business and looking for any indications of growth in consumer spending and revenue. A slowdown in spending would negatively impact market sentiment. However, there is cautious optimism that new management can implement strategies to turn the situation around.
As of Friday afternoon, PayPal stock has declined by 29% in 2023, while Block has experienced a steeper decline of 36%.