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PayPal Holdings, Inc. (PYPL - Free Report) reported non-GAAP earnings of $1.08 per share in fourth-quarter 2020, which surpassed the Zacks Consensus Estimate by 8%. Further, the figure improved 29% on a year-over-year basisand 0.9% sequentially.
Net revenues of $6.12billion outpaced the Zacks Consensus Estimate of $6.06 billion. The figure improved 23% from the year-ago quarter on both reported and FX-neutral basis. Further, it increased 12% from the prior quarter.
Top-line growth was driven by strong performance by Venmo and merchant services. Further, accelerating total payment volume (“TPV”), courtesy of increasing net new active accounts, contributed well.
Additionally, growing transaction revenues drove the results in the reported quarter.
Notably, PayPal has returned 110.4% over a year, outperforming the industry’s rally of 102.4%.
Further, shares of the company have gained 4.9% in the pre-market trading, which can primarily be attributed to better-than-expected results for the fourth quarter.
The boom in digital payment and the e-commerce space, owing to the coronavirus pandemic, remained a major tailwind.
Top Line in Detail
By Type: Transaction revenues amounted to $5.7 billion (93% of net revenues), up 25% from the year-ago quarter.Other value-added services generated revenues of $434 million (accounting for 7% of net revenues), up 2% year over year.
By Geography: Revenues from the United States totaled $3.1 billion (50.2% of net revenues), up 18% on a year-over-year basis. International revenues were $3.04 billion (49.8% of revenues), up 29% from the prior-year quarter.
Key Metrics to Consider
PayPal witnessed year-over-year growth of 24% in total active accounts with the addition of 16 million net new active accounts during the reported quarter. The total number of active accounts was 377 million in the quarter under review.
Additionally, the total number of payment transactions came in at 4.42 billion, up 27% on a year-over-year basis.
Further, the company’s payment transactions per active account were 40.9 million, which improved 1% from the year-ago quarter.
TPV amounted to $277.1 billion for the reported quarter, reflecting year-over-year growth of 39% and 36%on spot rate and currency-neutral basis, respectively.
Notably, year-over-year growth in TPV was primarily driven by robust Venmo, which accounted for $47 billion of TPV, surging 60% on a year-over-year basis on strong monetization efforts.
Further, merchant services, which contributed 94% to the TPV and the volume generated from these services rose 42% year over year.
Operating Details
PayPal’s operating expenses were $5.2 billion in the fourth quarter, up 23.8% from the prior-year quarter. As a percentage of net revenues, the figure expanded 30 basis points (bps) year over year to 84.2%.
Further, non-GAAP operating margin came in at 25%, expanding 100 bps from the year-ago quarter.
PayPal Holdings, Inc. Price, Consensus and EPS Surprise
As of Dec 31, 2020, cash equivalents and investments were $13.1 billion, down from $14.2 billion on Sep 30, 2020.
PayPal had a long-term debt balance of $8.939 billion at the end of the fourth quarter compared with $8.937 billion at the end of the third quarter.
The company generated $1.3 billion of cash from operations, up from $720 million in the previous quarter.
Free cash flow came in at $1.1 billion during the reported quarter compared with $479 million in the prior quarter.
Further, the company returned $265 million to shareholders by repurchasing 1.3 million shares.
Guidance
For first-quarter 2021, PayPal expects revenues to reflect a year-over-year improvement of 28% at the current spot rate and 26% on a FX-neutral basis. The Zacks Consensus Estimate for revenues is pegged at $5.57 billion.
Non-GAAP earnings are anticipated to grow 50% year over year. The Zacks Consensus Estimate for earnings stands at 97 cents per share.
For 2021, PayPal projects revenues at $25.5 billion, which is likely to grow by 19% at a current spot rate and 17% at a FX-neutral basis. The Zacks Consensus Estimate for revenues is pegged at $25.19 billion.
Non-GAAP earnings for 2021 are anticipated to grow 17% year over year. The Zacks Consensus Estimate for earnings stands at $4.52 per share.
Additionally, TPV for 2020 is likely to exhibit growth ratein high-20s.
Long term earnings growth rate for Take Two Interactive, CDW, And CrwodStrike are currently pegged at 12%, 13.1% and 25%, respectively.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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PayPal (PYPL) Q4 Earnings Beat Estimates, Revenues Rise Y/Y
PayPal Holdings, Inc. (PYPL - Free Report) reported non-GAAP earnings of $1.08 per share in fourth-quarter 2020, which surpassed the Zacks Consensus Estimate by 8%. Further, the figure improved 29% on a year-over-year basisand 0.9% sequentially.
Net revenues of $6.12billion outpaced the Zacks Consensus Estimate of $6.06 billion. The figure improved 23% from the year-ago quarter on both reported and FX-neutral basis. Further, it increased 12% from the prior quarter.
Top-line growth was driven by strong performance by Venmo and merchant services. Further, accelerating total payment volume (“TPV”), courtesy of increasing net new active accounts, contributed well.
Additionally, growing transaction revenues drove the results in the reported quarter.
Notably, PayPal has returned 110.4% over a year, outperforming the industry’s rally of 102.4%.
Further, shares of the company have gained 4.9% in the pre-market trading, which can primarily be attributed to better-than-expected results for the fourth quarter.
The boom in digital payment and the e-commerce space, owing to the coronavirus pandemic, remained a major tailwind.
Top Line in Detail
By Type: Transaction revenues amounted to $5.7 billion (93% of net revenues), up 25% from the year-ago quarter.Other value-added services generated revenues of $434 million (accounting for 7% of net revenues), up 2% year over year.
By Geography: Revenues from the United States totaled $3.1 billion (50.2% of net revenues), up 18% on a year-over-year basis. International revenues were $3.04 billion (49.8% of revenues), up 29% from the prior-year quarter.
Key Metrics to Consider
PayPal witnessed year-over-year growth of 24% in total active accounts with the addition of 16 million net new active accounts during the reported quarter. The total number of active accounts was 377 million in the quarter under review.
Additionally, the total number of payment transactions came in at 4.42 billion, up 27% on a year-over-year basis.
Further, the company’s payment transactions per active account were 40.9 million, which improved 1% from the year-ago quarter.
TPV amounted to $277.1 billion for the reported quarter, reflecting year-over-year growth of 39% and 36%on spot rate and currency-neutral basis, respectively.
Notably, year-over-year growth in TPV was primarily driven by robust Venmo, which accounted for $47 billion of TPV, surging 60% on a year-over-year basis on strong monetization efforts.
Further, merchant services, which contributed 94% to the TPV and the volume generated from these services rose 42% year over year.
Operating Details
PayPal’s operating expenses were $5.2 billion in the fourth quarter, up 23.8% from the prior-year quarter. As a percentage of net revenues, the figure expanded 30 basis points (bps) year over year to 84.2%.
Further, non-GAAP operating margin came in at 25%, expanding 100 bps from the year-ago quarter.
PayPal Holdings, Inc. Price, Consensus and EPS Surprise
PayPal Holdings, Inc. price-consensus-eps-surprise-chart | PayPal Holdings, Inc. Quote
Balance Sheet & Cash Flow
As of Dec 31, 2020, cash equivalents and investments were $13.1 billion, down from $14.2 billion on Sep 30, 2020.
PayPal had a long-term debt balance of $8.939 billion at the end of the fourth quarter compared with $8.937 billion at the end of the third quarter.
The company generated $1.3 billion of cash from operations, up from $720 million in the previous quarter.
Free cash flow came in at $1.1 billion during the reported quarter compared with $479 million in the prior quarter.
Further, the company returned $265 million to shareholders by repurchasing 1.3 million shares.
Guidance
For first-quarter 2021, PayPal expects revenues to reflect a year-over-year improvement of 28% at the current spot rate and 26% on a FX-neutral basis. The Zacks Consensus Estimate for revenues is pegged at $5.57 billion.
Non-GAAP earnings are anticipated to grow 50% year over year. The Zacks Consensus Estimate for earnings stands at 97 cents per share.
For 2021, PayPal projects revenues at $25.5 billion, which is likely to grow by 19% at a current spot rate and 17% at a FX-neutral basis. The Zacks Consensus Estimate for revenues is pegged at $25.19 billion.
Non-GAAP earnings for 2021 are anticipated to grow 17% year over year. The Zacks Consensus Estimate for earnings stands at $4.52 per share.
Additionally, TPV for 2020 is likely to exhibit growth ratein high-20s.
Zacks Rank & Key Picks
PayPal currently has a Zacks Rank #3 (Hold).
Some other top-ranked stocks in the broader technology sector are Take Two Interactive (TTWO - Free Report) , CDW Corporation (CDW - Free Report) , and CrowdStrike (CRWD - Free Report) . All stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long term earnings growth rate for Take Two Interactive, CDW, And CrwodStrike are currently pegged at 12%, 13.1% and 25%, respectively.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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