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Paypal (PYPL) Down 3.4% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Paypal (PYPL - Free Report) . Shares have lost about 3.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Paypal due for a breakout? 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's Q2 Earnings Surpass Estimates
PayPal 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.
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.
Non-GAAP earnings are expected to be $1.07 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.
Non-GAAP earnings for 2021 are anticipated to be $4.70 per share, suggesting year-over-year growth of 21%.
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.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -8.23% due to these changes.
VGM Scores
Currently, Paypal has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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.
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Paypal (PYPL) Down 3.4% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Paypal (PYPL - Free Report) . Shares have lost about 3.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Paypal due for a breakout? 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's Q2 Earnings Surpass Estimates
PayPal 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.
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.
Non-GAAP earnings are expected to be $1.07 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.
Non-GAAP earnings for 2021 are anticipated to be $4.70 per share, suggesting year-over-year growth of 21%.
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.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -8.23% due to these changes.
VGM Scores
Currently, Paypal has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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.