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FILE PHOTO: A smartphone with the PayPal logo is placed on a laptop in this illustration taken on July 14, 2021.
Dado Ruvic | Reuters
PayPal, Block, and Affirm are undergoing significant scrutiny as they prepare for upcoming earnings reports, with investors increasingly concerned about trends in consumer health.
The financial markets have seen heightened volatility early this year, largely driven by apprehensions surrounding President Donald Trump’s extensive tariffs. This legislation raises fears of increased import costs, which could potentially lead to higher unemployment rates and a decrease in consumer spending.
In the e-commerce sector, an important regulatory change is the abolition of de minimis trade exemptions for Chinese imports, effective May 2. This adjustment poses a threat to billions of dollars in cost-effective cross-border e-commerce transactions, particularly affecting discount platforms like Temu and Shein.
Wells Fargo analysts noted in an April 16 report that these tariff-related concerns, combined with macroeconomic uncertainties, will influence the financial outlook for these companies. Since around 90% of PayPal’s revenue stems from consumer-driven transactions, the firm indicated that it is particularly vulnerable to these fluctuations.
PayPal is set to report its earnings after market close on Tuesday, with Block, the parent company of Square, scheduled for Thursday, and Affirm following next Thursday. Year-to-date, these companies have faced significant declines in stock value: PayPal has decreased by 23%, Block by 32%, and Affirm by 19%, contrasting with the 10% drop in the tech-heavy Nasdaq.
Last week saw a slight rebound in their stock prices as Wall Street displayed renewed optimism regarding potential progress on trade agreements, suggesting that the proposed tariffs may not be as severe as initially anticipated.
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In early April, President Trump enacted an executive order imposing tariffs on over 180 countries and territories. Following an initial market downturn, he proposed a 90-day suspension on most tariffs, although duties on Chinese imports remain as high as 145%. The standard tariff rate for goods coming into the United States from various countries stands at 10%.
The timing of these fintech earnings coincides with announcements from major technology firms like Meta, Microsoft, Amazon, and Apple this week. Last week, Tesla and Alphabet addressed the potential ramifications of regulatory changes during their earnings calls.
On Alphabet’s earnings call, Google’s Chief Business Officer Philipp Schindler mentioned that the elimination of the de minimis trade loophole is likely to introduce a small challenge to their advertising business in 2025, predominantly affecting retailers in the Asia-Pacific region.
While acknowledging that Google cannot escape the current macroeconomic challenges, Schindler emphasized the company’s experience in navigating uncertain environments.
E-commerce challenges
The mixed signals from the administration have created an atmosphere of uncertainty, making it difficult for companies to provide reliable forecasts for the current quarter and the remainder of the year. Some firms, like Klarna— a competitor of Affirm in the buy now, pay later sector— and the ticket marketplace StubHub, found it necessary to postpone their long-awaited initial public offerings shortly after submitting their filings to the SEC.
Analysts at Barclays noted in an April 17 report that increased tariffs would significantly impact e-commerce sales, particularly for items that previously entered the U.S. duty-free. They estimate that Temu and Shein account for more than 30% of affected trade flows, much of which is connected to digital wallets, buy now, pay later services, and payment processing systems.
According to Wells Fargo analysts, PayPal earns the majority of its revenue from consumer transactions, with 40% of its gross payment volume coming from international markets. The bank lowered its price target for PayPal from $80 to $74 on April 16, indicating rising margin pressures as trends in e-commerce weaken and competition intensifies.
Although PayPal has benefited from its Venmo platform, potential declines in consumer spending may pose risks to that area as well. Growth targets for the quarter— including a projected 5.5% rise in branded checkout volume— may be overly optimistic according to Wells Fargo’s analysis, especially in light of current non-store retail sales data.
Analysts from LSEG forecast that PayPal is likely to report just under 2% revenue growth year-over-year, totaling approximately $7.85 billion, with earnings projected at $1.16 per share.
Block is experiencing pressures on multiple fronts. User growth for Cash App was reported to be a modest 1.3% year-over-year in March, while Afterpay is tightening its lending criteria to mitigate credit losses. Barclays identified Block as particularly vulnerable to high rates of churn among small businesses and economic shifts affecting low-income consumers, noting that Afterpay transactions are heavily linked to discretionary spending.
Expectations for Block’s upcoming earnings include approximately 4% revenue growth, reaching $6.2 billion, and earnings of 87 cents per share, based on LSEG consensus.
Affirm has reported a 30% rise in monthly active users as of March; however, tightening credit conditions alongside broader economic slowdowns could hinder its short-term growth in loan volumes. Affirm predominantly relies on sales of electronics, clothing, furniture, and a range of other consumer products.
Projected figures for Affirm indicate a revenue growth of 36%, amounting to $783 million, with an expected loss of 3 cents per share according to consensus estimates from LSEG.
In their April 15 note, Barclays analysts observed that much of the retail sector may have experienced a pull-forward in discretionary spending during March and early April as consumers rushed to make purchases prior to the May tariff changes. This could complicate the interpretation of past performance results.
The analysts concluded that this scenario would merely postpone immediate concerns rather than resolve them.
Representatives from PayPal, Block, and Affirm have opted not to comment at this time.
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