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PayPal Q3 Earnings Impress Investors: ETFs to Win

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PayPal Holdings Inc.’s (PYPL - Free Report) shares gained about 13.8% in the past two days (as of Nov 3, 2020) after the company reported non-GAAP earnings of $1.07 per share in third-quarter 2020, which surpassed the Zacks Consensus Estimate by 13.8%. The bottom line improved 41% on a year-over-year basis but remained flat sequentially.

Net revenues of $5.46 billion outpaced the Zacks Consensus Estimate of $5.40 billion. The figure improved 25% from the year-ago quarter on both reported and FX-neutral basis. Further, it increased 3.8% from the prior quarter.

Quarter in Detail

PayPal witnessed year-over-year growth of 22% in total active accounts with the addition of 15.2 million net new active accounts during the reported quarter. The total number of active accounts was 361 million in the quarter under review. Additionally, the total number of payment transactions came in at 4.01 billion, up 30% on a year-over-year basis.

Further, the company’s payment transactions per active account were 40.1 million, which improved 1% from the year-ago quarter, reflecting strong customer engagement on PayPal’s platform. TPV amounted to $246.7 billion for the reported quarter, reflecting year-over-year growth of 38% 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 $44 billion of TPV, surging 61% on a year-over-year basis on strong monetization efforts. Further, merchant services, which contributed 913% to the TPV and the volume generated from these services rose 40% year over year. The company witnessed more than 1.5 million of merchants signing up during the third quarter.

Guidance

For fourth-quarter 2020, PayPal expects revenues to reflect year-over-year improvement in the range of 20-25% at both current spot rate and FX-neutral basis.  Non-GAAP earnings, which are anticipated to grow 17-18%, are expected to bear the acquisitions’ impact of 3 cents per share.

For 2020, PayPal expects revenues to reflect year-over-year improvement in the range of 20-21% at current spot rate and 21-22% at FX-neutral basis. Non-GAAP earnings, which are anticipated to grow 27-28%, are expected to carry the acquisitions’ impact of 13 cents per share.

ETFs in Focus

This can be a winning opportunity to enter into some ETFs that are heavy on PayPal.

ETFMG Prime Mobile Payments ETF (IPAY - Free Report)  — 6.18% exposure

The underlying Prime Mobile Payments Index provides a benchmark for investors interested in tracking the mobile and electronic payments industry, specifically focusing on credit card networks, payment infrastructure and software services, payment processing services, and payment solutions. It charges 75 bps in fees.

Global X FinTech ETF (FINX - Free Report)  — 5.79% exposure

The underlying Indxx Global FinTech Thematic Index invests in companies on the leading edge of the emerging financial technology sector, which encompasses a range of innovations helping to transform established industries like insurance, investing, fundraising, and third-party lending through unique mobile and digital solutions. The expense ratio is 0.68%.

iShares U.S. Industrials ETF (IYJ - Free Report) — 5.93% exposure

The fund offers exposure to U.S. companies that produce goods used in construction and manufacturing. The fund charges 42 bps in fees.

SPDR SSGA Gender Diversity Index ETF (SHE - Free Report) – Up 5.55%

The fund gives exposure to companies on the index that are ranked within each sector by three gender diversity ratios. The index seeks to minimize variations in sector weights compared to the composition of its broader investment universe by focusing on companies with the highest levels within their sectors of senior leadership gender diversity. The fund charges 20 bps in fees.

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