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PayPal (PYPL) Q3 Earnings Beat Estimates, Revenues Rise Y/Y

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PayPal Holdings, Inc. (PYPL - Free Report) reported non-GAAP earnings of $1.11 per share in third-quarter 2021, which surpassed the Zacks Consensus Estimate by 3.7%. Further, the figure improved 3.7% on a year-over-year basis but declined 3.5% sequentially.

Net revenues of $6.18 billion exhibited year-over-year growth of 13% on a FX-neutral basis as well as on a reported basis.

However, the figure missed the Zacks Consensus Estimate of $6.21 billion and declined 0.9% sequentially.

Growing transaction and other value-added services’ revenues drove year-over-year revenues growth in the reported quarter. Also, accelerating U.S. and international revenues contributed well.

The strong performance by Venmo and merchant services remained a positive. The growing total payment volume (“TPV”), courtesy of increasing net new active accounts, drove the results.

PayPal’s portfolio strength and robust two-sided global payment 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 $5.61 billion (91% of net revenues), up 10% from the year-ago quarter. Other value-added services generated revenues of $575 million (accounting for 9% of net revenues), up 50% year over year.

By Geography: Revenues from the United States totaled $3.5 billion (56% of net revenues), up 23% on a year-over-year basis. International revenues were $2.71 billion (44% of revenues), up 13% from the prior-year quarter.

Key Metrics to Consider

PayPal witnessed year-over-year growth of 15% in total active accounts, with 13.3 million net new active accounts in the reported quarter. The total number of active accounts was 416 million in the quarter under review.

The total number of payment transactions was 4.9 billion, up 22% on a year-over-year basis.

The company’s payment transactions per active account were 44.2 million, which improved 10% from the year-ago quarter.

TPV amounted to $309.9 billion for the reported quarter, reflecting year-over-year growth of 26% and 24% 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 $60 billion of TPV, rising 36% on a year-over-year basis on strong monetization efforts.

Merchant services, which contributed 97% to TPV, and the volume generated from these services rose 31% year over year.

Operating Details

PayPal’s operating expenses were $5.14 billion in the third quarter, up 14.6% from the prior-year quarter. As a percentage of net revenues, the figure expanded 100 basis points (bps) on a year-over-year basis.

Non-GAAP operating margin was at 24%, contracting 300 bps from the year-ago quarter.

Balance Sheet & Cash Flow

As of Sep 30, 2021, cash equivalents and investments were $13.3 billion, up from $12.4 billion as of Jun 30, 2021.

PayPal had a long-term debt balance of $7.9 billion at the end of the third quarter compared with $8.9 billion at the end of the second quarter.

The company generated $1.5 billion of cash from operations, up from $1.3 billion in the previous quarter.

Free cash flow was $1.3 billion in the reported quarter compared with $1.1 billion in the prior quarter.

The company returned $350 million to shareholders by repurchasing 1.27 million shares.

Guidance

For fourth-quarter 2021, PayPal expects revenues between $6.85 billion and $6.95 billion, with year-over-year growth of 12-14% at a current spot rate. The Zacks Consensus Estimate for revenues is pegged at $7.25 billion.

Non-GAAP earnings are expected to be $1.12 per share, reflecting 4% year-over-year growth. The Zacks Consensus Estimate for earnings is pegged at $1.28 per share.

For 2021, PayPal anticipates revenues between $25.3 billion and $25.4 billion, indicating growth of 18% at current spot rates and 17% on a currency-neutral basis. Previously, the company projected revenues at $25.75 billion.

The Zacks Consensus Estimate for 2021 revenues is pegged at $25.73 billion.

Non-GAAP earnings for 2021 are anticipated to be $4.60 per share, suggesting year-over-year growth of 19%. Previously, the company projected earnings at $4.70 per share. The Zacks Consensus Estimate for 2021 earnings is pegged at $4.72 per share.

TPV for 2021 is likely to exhibit 33-34% growth on a spot rate basis. On FX-neutral basis, TPV is expected to grow 31-32%.

Net new active accounts are likely to be 55 million in 2021.

Zacks Rank & Stocks to Consider

PayPal currently carries a Zacks Rank #4 (Sell).

Some better-ranked companies in the broader technology sector are Advanced Micro Devices (AMD - Free Report) , ASE Technology (ASX - Free Report) and Mimecast Limited (MIME - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rates for Advanced Micro Devices, ASE and Mimecast are currently projected at 46.2%, 35% and 26.9%, respectively.