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Why Is Paypal (PYPL) Up 4.6% Since Last Earnings Report?
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A month has gone by since the last earnings report for Paypal (PYPL - Free Report) . Shares have added about 4.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Paypal due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
PayPal Q3 Earnings Beat Estimates, Revenues Up Y/Y
PayPal Holdings reported third-quarter non-GAAP earnings of $1.30 per share, which beat the Zacks Consensus Estimate by 6.56% and increased 20.4% year over year.
Net revenues of $7.42 billion exhibited year-over-year growth of 9% on a FX-neutral (FXN) basis and 8.4% on a spot basis. The figure surpassed the Zacks Consensus Estimate by 0.37%.
Total payment volume amounted to $387.701 billion, reflecting year-over-year growth of 15% on a spot basis and 13% on an FXN basis. The figure topped the Zacks Consensus Estimate by 1.53%.
Quarter Details
Growing transaction and other value-added services’ revenues drove top-line growth on a year-over-year basis in the reported quarter.
Transaction revenues were $6.654 billion (90% of net revenues), up 7% year over year. Other value-added services generated revenues of $764 million (10% of net revenues), up 25% year over year.
U.S. net revenues accounted for 57% of total revenues. The top-line figure increased 7% year over year to $4.257 billion.
International revenues increased 10% on a spot basis and 11% on an FXN basis to $3.161 billion.
PayPal witnessed a year-over-year decline of 1% in total active accounts, which came in at 428 million in the quarter under review.
The total number of payment transactions was 6.275 billion, up 11% on a year-over-year basis. Payment transactions per active account on a trailing 12-month basis were 56.6 million, which improved 13% year over year.
The non-GAAP operating margin was 22.2%, contracting 18 bps year over year.
Balance Sheet & Cash Flow
As of Sep 30, 2023, cash equivalents and investments were $15.4 billion, up from $9.96 billion as of Jun 30, 2023.
PayPal had a long-term debt balance of $10.6 billion as of Sep 30, 2023 compared with $10.55 billion as of Jun 30, 2023.
PYPL generated $1.3 billion in cash from operations during the reported quarter. Free cash flow was $1.1 billion, much better than the $350 million reported in the previous quarter.
The company returned $1.4 billion to its shareholders by repurchasing 23 million shares.
Guidance
For fourth-quarter 2023, PayPal expects revenues to grow roughly between 6% and 7% on a spot basis and 7% to 8% on an FXN basis.
Non-GAAP earnings are expected to grow roughly 10% year over year to $1.36 per share.
The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.41 per share, up by a penny over the past 30 days.
For 2023, PayPal raised its guidance for non-GAAP earnings to $4.98 from $4.95, suggesting growth of roughly 21% over 2022.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Paypal has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Paypal has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Paypal belongs to the Zacks Internet - Software industry. Another stock from the same industry, Pinterest (PINS - Free Report) , has gained 10.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Pinterest reported revenues of $763.2 million in the last reported quarter, representing a year-over-year change of +11.5%. EPS of $0.28 for the same period compares with $0.11 a year ago.
For the current quarter, Pinterest is expected to post earnings of $0.50 per share, indicating a change of +72.4% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.5% over the last 30 days.
Pinterest has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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Why Is Paypal (PYPL) Up 4.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Paypal (PYPL - Free Report) . Shares have added about 4.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Paypal due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
PayPal Q3 Earnings Beat Estimates, Revenues Up Y/Y
PayPal Holdings reported third-quarter non-GAAP earnings of $1.30 per share, which beat the Zacks Consensus Estimate by 6.56% and increased 20.4% year over year.
Net revenues of $7.42 billion exhibited year-over-year growth of 9% on a FX-neutral (FXN) basis and 8.4% on a spot basis. The figure surpassed the Zacks Consensus Estimate by 0.37%.
Total payment volume amounted to $387.701 billion, reflecting year-over-year growth of 15% on a spot basis and 13% on an FXN basis. The figure topped the Zacks Consensus Estimate by 1.53%.
Quarter Details
Growing transaction and other value-added services’ revenues drove top-line growth on a year-over-year basis in the reported quarter.
Transaction revenues were $6.654 billion (90% of net revenues), up 7% year over year. Other value-added services generated revenues of $764 million (10% of net revenues), up 25% year over year.
U.S. net revenues accounted for 57% of total revenues. The top-line figure increased 7% year over year to $4.257 billion.
International revenues increased 10% on a spot basis and 11% on an FXN basis to $3.161 billion.
PayPal witnessed a year-over-year decline of 1% in total active accounts, which came in at 428 million in the quarter under review.
The total number of payment transactions was 6.275 billion, up 11% on a year-over-year basis. Payment transactions per active account on a trailing 12-month basis were 56.6 million, which improved 13% year over year.
The non-GAAP operating margin was 22.2%, contracting 18 bps year over year.
Balance Sheet & Cash Flow
As of Sep 30, 2023, cash equivalents and investments were $15.4 billion, up from $9.96 billion as of Jun 30, 2023.
PayPal had a long-term debt balance of $10.6 billion as of Sep 30, 2023 compared with $10.55 billion as of Jun 30, 2023.
PYPL generated $1.3 billion in cash from operations during the reported quarter. Free cash flow was $1.1 billion, much better than the $350 million reported in the previous quarter.
The company returned $1.4 billion to its shareholders by repurchasing 23 million shares.
Guidance
For fourth-quarter 2023, PayPal expects revenues to grow roughly between 6% and 7% on a spot basis and 7% to 8% on an FXN basis.
Non-GAAP earnings are expected to grow roughly 10% year over year to $1.36 per share.
The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.41 per share, up by a penny over the past 30 days.
For 2023, PayPal raised its guidance for non-GAAP earnings to $4.98 from $4.95, suggesting growth of roughly 21% over 2022.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Paypal has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Paypal has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Paypal belongs to the Zacks Internet - Software industry. Another stock from the same industry, Pinterest (PINS - Free Report) , has gained 10.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Pinterest reported revenues of $763.2 million in the last reported quarter, representing a year-over-year change of +11.5%. EPS of $0.28 for the same period compares with $0.11 a year ago.
For the current quarter, Pinterest is expected to post earnings of $0.50 per share, indicating a change of +72.4% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.5% over the last 30 days.
Pinterest has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.