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Will Portfolio Strength Benefit PayPal's (PYPL) Q4 Earnings?

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PayPal Holdings, Inc. (PYPL - Free Report) is slated to report fourth-quarter 2020 results on Feb 3.

Notably, the company’s robust services have been enabling it to maintain a deep and trusted relationship with merchants and consumers. Moreover, its two-sided platform helps in developing direct financial relationships with both customers and merchants.

The Total Payment Volume (“TPV”) for the fourth quarter is anticipated to reflect the impact of all these factors. Notably, TPV is a key growth metric for PayPal’s top line.

TPV in the last reported quarter improved 38% and 36% year over year on spot rate and currency-neutral basis, respectively, to $246.7 billion. This can be attributed to well-performing Venmo, which accounted for more than $44 billion of TPV.

For fourth-quarter 2020, the Zacks Consensus Estimate for TPV is pegged at $267.3 billion, suggesting growth of 34% on a year-over-year basis.

Click here to know how the company’s overall fourth-quarter performance is likely to have been.

Portfolio Strength: A Key Catalyst

PayPal’s persistent efforts toward strengthening its services portfolio are likely to have aided the company in gaining traction across customers in the quarter under review.

The company’s fourth-quarter results are likely to reflect the strength in product lines such as Venmo and One Touch.

The company’s soon-to-be-reported quarterly result is also likely to have benefited from its growing monetization efforts, which are expected to have contributed to Venmo’s TPV in the quarter under review.

Further, One Touch has been gaining traction across merchants by aiding their sales growth in the competitive omni-channel retail environment. Moreover, the impacts of its robust mobile checkout services are anticipated to get reflected in PayPal’s mobile TPV in the fourth quarter.

Both Venmo and One Touch are expected to have benefited the company’s net new active accounts. Further, these two products are known for accelerating customer engagement on PayPal’s platform, which is likely to have bolsteredtotal active accounts in the quarter under review.

Additionally, the company’s strengthening momentum in the cryptocurrency space is expected to have remained a major tailwind during the to-be-reported quarter. The launch of a service that allows PayPal’s customers to buy, hold and sell cryptocurrency directly from their PayPal account remained positive.

Further, PayPal Commerce Platform, which offers an amalgamation of its technologies, tools, services and financing for businesses of all sizes, and back-end systems like compliance and account authentication, helps in enhancing end-to-end payment capabilities of merchants.

The service is anticipated to have aided the company in gaining traction across e-commerce companies, marketplaces and crowdfunding platforms.

Additionally, expanding international footprint of Xoom is likely to get reflected in the company’s fourth-quarter results.

Zacks Rank & Stocks to Consider

Currently, PayPal carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Synaptics Incorporated (SYNA - Free Report) , Microchip Technology Incorporated (MCHP - Free Report) and Mettler-Toledo International, Inc. (MTD - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rates of Synaptics, Microchip Technology and Mettler-Toledo are pegged at 10%, 14.92% and 12.1%, respectively.

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