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PayPal (PYPL) Q2 Earnings Beat Estimates, Revenues Rise Y/Y

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PayPal Holdings, Inc. (PYPL - Free Report) reported non-GAAP earnings of $1.15 per share in second-quarter 2021, which surpassed the Zacks Consensus Estimate by 1.8%. Further, the figure improved 8% on a year-over-year basis but declined 5.7% sequentially.

Net revenues of $6.24 billion exhibited year-over-year growth of 17% on a FX-neutral basis and 19% on a reported basis. It increased 1.4% from the prior quarter.

However, the figure missed the Zacks Consensus Estimate of $6.32 billion.

Year-over-year revenue growth was driven by a strong performance by Venmo and merchant services. Accelerating total payment volume (“TPV”), courtesy of increasing net new active accounts, contributed well.

Growing transaction and other value-added services’ revenues drove the results in the reported quarter.

The boom in the digital payment space, owing to the coronavirus pandemic, has been a major tailwind. PayPal’s portfolio strength and robust two-sided global payments platform are likely to continue benefiting its financial performance in the near term.

PayPal Holdings, Inc. Price, Consensus and EPS Surprise

 

PayPal Holdings, Inc. Price, Consensus and EPS Surprise

PayPal Holdings, Inc. price-consensus-eps-surprise-chart | PayPal Holdings, Inc. Quote

Top Line in Detail

By Type: Transaction revenues amounted to $5.8 billion (93% of net revenues), up 17% from the year-ago quarter.Other value-added services generated revenues of $441 million (accounting for 7% of net revenues), up 40% year over year.

By Geography: Revenues from the United States totaled $3.3 billion (52% of net revenues), up 23% on a year-over-year basis. International revenues were $2.9 billion (48% of revenues), up 14% from the prior-year quarter.

Key Metrics to Consider

PayPal witnessed year-over-year growth of 16% in total active accounts, with 11.4 million net new active accounts inthe reported quarter.The total number of active accounts was 403 million in the quarter under review.

The total number of payment transactions was 4.7 billion, up 27% on a year-over-year basis.

The company’s payment transactions per active account were 43.5 million, which improved 11% from the year-ago quarter.

TPV amounted to $310.99 billion for the reported quarter, reflecting year-over-year growth of 40% and 36%on a spot rate and a currency-neutral basis, respectively.

Notably, year-over-year growth in TPV was primarily driven by robust Venmo, which accounted for $58 billion of TPV, rising58% on a year-over-year basis on strong monetization efforts.

Merchant services, which contributed 96% to TPV, and the volume generated from these services rose 48% year over year.

Operating Details

PayPal’s operating expenses were $5.1 billion in the second quarter, up 18.6% from the prior-year quarter. As a percentage of net revenues, the figure remained flat on a year-over-year basis.

Non-GAAP operating margin was at 27%, contracting 100 bps from the year-ago quarter.

Balance Sheet & Cash Flow

As of Jun 30, 2021, cash equivalents and investments were $12.4 billion, down from $13.1 billion as of Mar 31, 2021.

PayPal had a long-term debt balance of $8.945 billion at the end of the second quarter compared with $8.942 billion at the end of the first quarter.

The company generated $1.3 billion of cash from operations, down from $1.8 billion in the previous quarter.

Free cash flow was $1.1 billion in the reported quarter compared with $1.5 billion in the prior quarter.

The company returned $200 million to shareholders by repurchasing 765 K shares.

Guidance

For third-quarter 2021, PayPal expects revenues between $6.15 billion and $6.25 billion, with year-over-year growth of 13-14% at a current spot rate. The Zacks Consensus Estimate for revenues is pegged at $6.48 billion.

Non-GAAP earnings are expected to be $1.07 per share. The Zacks Consensus Estimate for earnings is pegged at $1.16 per share.

For 2021, PayPal anticipates revenues of $25.75 billion, which is likely to grow 20% at a current spot rate and 18.5% on a FX-neutral basis. The Zacks Consensus Estimate for revenues is pegged at $25.87 billion.

Non-GAAP earnings for 2021 are anticipated to be $4.70 per share, suggesting year-over-year growth of 21%.The Zacks Consensus Estimate for earnings is pegged at $4.74 per share.

TPV for 2021 is likely to exhibit 33-35% growth on both spot rate and FX-neutral basis.

Also, net new active accounts are likely to be 52-55 million.

Zacks Rank & Other Key Picks

PayPal currently has a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader technology sector are KLA Corporation (KLAC - Free Report) , Carrier Global Corporation (CARR - Free Report) and Trimble Inc. (TRMB - Free Report) . All three companies currently carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
    
The long-term earnings growth rates of KLA, Carrier Global and Trimble are pegged at 14.03%, 13.38% and 10.1%, respectively.