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The company’s upcoming results are expected to reflect portfolio strength, which has been helping it maintain a deep and trusted relationship with merchants and consumers.
Market uncertainties, high inflation, unfavorable foreign exchange fluctuations and sluggish trends in consumer spending are likely to have been concerning.
For second-quarter 2024, PayPal expects revenues to grow 6.5% on a spot rate basis and 7% on a currency-neutral basis from the year-ago quarter. The Zacks Consensus Estimate for second-quarter revenues is pegged at $7.78 billion, indicating 6.8% growth from the figure reported in the year-ago quarter.
The company expects non-GAAP earnings per share to rise in the low-double-digit percentage on a year-over-year basis.
The consensus mark for second-quarter earnings is pegged at 96 cents per share, indicating a fall of 17.2% from the figure reported in the year-ago quarter. Earnings estimates have been revised upward by 1.05% over the past 30 days.
Image Source: Zacks Investment Research
PayPal has an impressive earnings surprise history. In the last reported quarter, the company delivered an earnings surprise of 16.67%. The company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and matched the same once, the average surprise being 8.01%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model predicts an earnings beat for PayPal this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
PayPal has been well-focused on execution, portfolio enhancement and customer strategies.
Strong monetization efforts of Venmo are likely to have aided its adoption rate in the to-be-reported quarter. It is likely to have driven growth in the Total Payments Volume (TPV) of the company.
PayPal’s growing relationship with Apple (AAPL - Free Report) in terms of product integration is likely to have been a positive. The integration of PayPal and Venmo credit or debit cards into Apple Wallet remains noteworthy. The introduction of Tap to Pay on iPhone for Venmo and Zettle users is expected to have driven the company’s momentum among small businesses in the quarter under review.
Also, the growing momentum in Tap to Pay on Android is likely to have boosted Venmo and Zettle’s user bases.
The company’s offering of various features that allow small businesses to accept payments made through PayPal, credit and debit cards, digital wallets, Venmo, PayPal Pay Later, and Apple Pay is expected to have been another positive.
Its strength in Xoom, which has been riding on the new Debit Card Deposit that allows U.S. customers to conveniently and securely send money directly to friends and family’s eligible Visa debit cards, is expected to have been a plus.
Advancing checkout experiences are expected to have aided the company’s momentum among large enterprise businesses in the to-be-reported quarter.
PayPal’s strengthening cryptocurrency efforts, along with the integration with Venmo and the expanding global footprint of its cryptocurrency service, are expected to have contributed well. In the second quarter, the company made PayPal USD (PYUSD) available on the Solana blockchain, making its stablecoin faster and cheaper to use. This is anticipated to have boosted the company’s cryptocurrency prospects.
However, the highly competitive nature of the market in which PayPal operates is likely to have been a big concern for its market position and active accounts number. The company faces stiff competition from industry peers like Block (SQ - Free Report) , Alphabet’s (GOOGL - Free Report) Google and Apple, as well as traditional fintech companies, such as MasterCard and Visa.
Key Metrics to Consider
For the second quarter, the Zacks Consensus Estimate for PYPL’s active customer accounts is pegged at 428 million, suggesting a 0.7% fall from the year-ago quarter’s reported figure.
The consensus estimate for the total number of payment transactions is pegged at 6.91 billion, indicating an improvement of 13.7% from the prior-year quarter’s reported figure.
The Zacks Consensus Estimate for TPV is pegged at $419.54 billion, suggesting growth of 11.4% on a year-over-year basis.
The consensus mark for transaction revenues stands at $7.06 billion, implying growth of 7.7% from the year-ago actual.
The Zacks Consensus Estimate for other value-added services revenues is pegged at $720 million, indicating a fall of 1.5% on a year-over-year basis.
Price Performance & Valuation
PayPal’s shares have declined 6.8% on a year-to-date basis against the industry’s 4.9% growth, the Zacks Computer & Technology sector’s 18.6% rise and the S&P 500 index’s 14.1% rise. Among its peers, Apple and Alphabet have gained 13% and 19.7% year to date, respectively, while Block has lost 20.4% in the same time frame.
Year-to-Date Performance
Image Source: Zacks Investment Research
Now, let us look at the value PayPal offers investors at current levels.
Currently, PYPL is trading at a discount, with a forward 12-month P/S of 1.79X compared with the industry’s 2.39X and lower than the median of 2.04X, reflecting a good entry point for investors.
Image Source: Zacks Investment Research
Investment Thesis
PayPal presents a compelling investment opportunity as a major player in the global digital payments industry. Its strong brand, innovative technology and ability to adapt to market trends are positives. The company’s two-sided platform, which helps develop direct financial relationships with customers and merchants, is expected to strengthen its market position.
PayPal’s solid growth strategies, deepening focus on various merchant groups and customers, strong solutions portfolio, and growing prospects in the cryptocurrency space are expected to benefit it in the long run as well as in the near-term amid the current macroeconomic headwinds and intensified competitive scenario.
Conclusion
Given its fundamental strength, the company presents an attractive investment option for investors. PayPal currently has a Growth Style Score and a Value Style Score of B, which are hard to ignore.
PayPal’s long-term prospects are promising as the digital payments industry continues to gain momentum in this fast-paced world with the growing demand for peer-to-peer payments and digital wallets.
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Should You Buy PayPal (PYPL) Stock Ahead of Q2 Earnings?
PayPal (PYPL - Free Report) is scheduled to release its second-quarter 2024 results on Jul 30.
The company’s upcoming results are expected to reflect portfolio strength, which has been helping it maintain a deep and trusted relationship with merchants and consumers.
Market uncertainties, high inflation, unfavorable foreign exchange fluctuations and sluggish trends in consumer spending are likely to have been concerning.
For second-quarter 2024, PayPal expects revenues to grow 6.5% on a spot rate basis and 7% on a currency-neutral basis from the year-ago quarter. The Zacks Consensus Estimate for second-quarter revenues is pegged at $7.78 billion, indicating 6.8% growth from the figure reported in the year-ago quarter.
The company expects non-GAAP earnings per share to rise in the low-double-digit percentage on a year-over-year basis.
The consensus mark for second-quarter earnings is pegged at 96 cents per share, indicating a fall of 17.2% from the figure reported in the year-ago quarter. Earnings estimates have been revised upward by 1.05% over the past 30 days.
Image Source: Zacks Investment Research
PayPal has an impressive earnings surprise history. In the last reported quarter, the company delivered an earnings surprise of 16.67%. The company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and matched the same once, the average surprise being 8.01%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model predicts an earnings beat for PayPal this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
PayPal has an Earnings ESP of +2.96% and a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping Quarterly Performance
PayPal has been well-focused on execution, portfolio enhancement and customer strategies.
Strong monetization efforts of Venmo are likely to have aided its adoption rate in the to-be-reported quarter. It is likely to have driven growth in the Total Payments Volume (TPV) of the company.
PayPal’s growing relationship with Apple (AAPL - Free Report) in terms of product integration is likely to have been a positive. The integration of PayPal and Venmo credit or debit cards into Apple Wallet remains noteworthy. The introduction of Tap to Pay on iPhone for Venmo and Zettle users is expected to have driven the company’s momentum among small businesses in the quarter under review.
Also, the growing momentum in Tap to Pay on Android is likely to have boosted Venmo and Zettle’s user bases.
The company’s offering of various features that allow small businesses to accept payments made through PayPal, credit and debit cards, digital wallets, Venmo, PayPal Pay Later, and Apple Pay is expected to have been another positive.
Its strength in Xoom, which has been riding on the new Debit Card Deposit that allows U.S. customers to conveniently and securely send money directly to friends and family’s eligible Visa debit cards, is expected to have been a plus.
Advancing checkout experiences are expected to have aided the company’s momentum among large enterprise businesses in the to-be-reported quarter.
PayPal’s strengthening cryptocurrency efforts, along with the integration with Venmo and the expanding global footprint of its cryptocurrency service, are expected to have contributed well. In the second quarter, the company made PayPal USD (PYUSD) available on the Solana blockchain, making its stablecoin faster and cheaper to use. This is anticipated to have boosted the company’s cryptocurrency prospects.
However, the highly competitive nature of the market in which PayPal operates is likely to have been a big concern for its market position and active accounts number. The company faces stiff competition from industry peers like Block (SQ - Free Report) , Alphabet’s (GOOGL - Free Report) Google and Apple, as well as traditional fintech companies, such as MasterCard and Visa.
Key Metrics to Consider
For the second quarter, the Zacks Consensus Estimate for PYPL’s active customer accounts is pegged at 428 million, suggesting a 0.7% fall from the year-ago quarter’s reported figure.
The consensus estimate for the total number of payment transactions is pegged at 6.91 billion, indicating an improvement of 13.7% from the prior-year quarter’s reported figure.
The Zacks Consensus Estimate for TPV is pegged at $419.54 billion, suggesting growth of 11.4% on a year-over-year basis.
The consensus mark for transaction revenues stands at $7.06 billion, implying growth of 7.7% from the year-ago actual.
The Zacks Consensus Estimate for other value-added services revenues is pegged at $720 million, indicating a fall of 1.5% on a year-over-year basis.
Price Performance & Valuation
PayPal’s shares have declined 6.8% on a year-to-date basis against the industry’s 4.9% growth, the Zacks Computer & Technology sector’s 18.6% rise and the S&P 500 index’s 14.1% rise. Among its peers, Apple and Alphabet have gained 13% and 19.7% year to date, respectively, while Block has lost 20.4% in the same time frame.
Year-to-Date Performance
Image Source: Zacks Investment Research
Now, let us look at the value PayPal offers investors at current levels.
Currently, PYPL is trading at a discount, with a forward 12-month P/S of 1.79X compared with the industry’s 2.39X and lower than the median of 2.04X, reflecting a good entry point for investors.
Image Source: Zacks Investment Research
Investment Thesis
PayPal presents a compelling investment opportunity as a major player in the global digital payments industry. Its strong brand, innovative technology and ability to adapt to market trends are positives. The company’s two-sided platform, which helps develop direct financial relationships with customers and merchants, is expected to strengthen its market position.
PayPal’s solid growth strategies, deepening focus on various merchant groups and customers, strong solutions portfolio, and growing prospects in the cryptocurrency space are expected to benefit it in the long run as well as in the near-term amid the current macroeconomic headwinds and intensified competitive scenario.
Conclusion
Given its fundamental strength, the company presents an attractive investment option for investors. PayPal currently has a Growth Style Score and a Value Style Score of B, which are hard to ignore.
PayPal’s long-term prospects are promising as the digital payments industry continues to gain momentum in this fast-paced world with the growing demand for peer-to-peer payments and digital wallets.