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Paypal (PYPL) Down 19.6% 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 19.6% 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 catalysts.
PayPal's Q4 Earnings Miss Estimates
PayPal Holdings reported non-GAAP earnings of $1.11 per share in fourth-quarter 2021, which missed the Zacks Consensus Estimate by 0.9%. Further, the figure improved 2.8% on a year-over-year basis, while coming in line with the prior-quarter figure.
Net revenues of $6.92 billion exhibited year-over-year growth of 13% on a FX-neutral basis and a reported basis. Further, the figure surpassed the Zacks Consensus Estimate of $6.88 billion and rose 11.9% sequentially.
Growing transaction and other value-added services’ revenues drove year-over-year revenues growth in the reported quarter. Also, accelerating U.S. revenues contributed well.
The strong performance by Venmo remained another positive. The growing total payment volume (“TPV”), courtesy of increasing net new active accounts, drove the results.
However, declining international revenues were concerning.
Top Line in Detail
By Type: Transaction revenues amounted to $6.4 billion (92% of net revenues), up 12% from the year-ago quarter. Other value-added services generated revenues of $541 million (accounting for 8% of net revenues), up 25% year over year.
By Geography: Revenues from the United States totaled $3.9 billion (56% of net revenues), up 27% on a year-over-year basis. International revenues were $3.02 billion (44% of revenues), down 1% from the prior-year quarter.
Key Metrics to Consider
PayPal witnessed year-over-year growth of 13% in total active accounts, with 9.8 million net new active accounts in the reported quarter. The total number of active accounts was 426 million in the quarter under review.
The total number of payment transactions was 5.3 billion, up 21% on a year-over-year basis.
The company’s payment transactions per active account were 45.4 million, which improved 11% from the year-ago quarter.
TPV amounted to $339.5 billion for the reported quarter, reflecting year-over-year growth of 23% on both spot rate and currency-neutral basis.
Notably, year-over-year growth in TPV was primarily driven by robust Venmo, which accounted for $60.6 billion of TPV, rising 29% on a year-over-year basis.
Operating Details
PayPal’s operating expenses were $5.9 billion in the fourth quarter, up 13.9% from the prior-year quarter. As a percentage of net revenues, the figure expanded 60 basis points (bps) on a year-over-year basis.
Non-GAAP operating margin was at 21.8%, contracting 290 bps from the year-ago quarter.
Balance Sheet & Cash Flow
As of Dec 31, 2021, cash equivalents and investments were $9.5 billion, down from $13.3 billion as of Sep 30, 2021.
PayPal had a long-term debt balance of $8.05 billion at the end of the fourth quarter compared with $7.9 billion at the end of the third quarter.
The company generated $1.8 billion of cash from operations, up from $1.5 billion in the previous quarter.
Free cash flow was $1.6 billion in the reported quarter compared with $1.3 billion in the prior quarter.
The company returned $1.5 billion to shareholders by repurchasing 8 million shares.
Guidance
For first-quarter 2022, PayPal expects year-over-year revenues growth of 6% on a current spot rate and a currency-neutral basis.
Non-GAAP earnings are expected to be 87 cents per share, including a benefit of 6 cents from credit loss reserve releases.
For 2022, PayPal anticipates year-over-year revenues growth of 15-17% at current spot rates as well as on a currency-neutral basis.
Non-GAAP earnings for 2021 are anticipated to be $4.60-$4.75 per share, which includes a benefit of 21 cents from credit loss reserve releases.
TPV for 2021 is likely to exhibit 19-22% growth on a spot rate basis. On a FX-neutral basis, TPV is expected to grow 21-23%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -27.6% due to these changes.
VGM Scores
Currently, Paypal has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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. It's no surprise Paypal has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Paypal (PYPL) Down 19.6% 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 19.6% 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 catalysts.
PayPal's Q4 Earnings Miss Estimates
PayPal Holdings reported non-GAAP earnings of $1.11 per share in fourth-quarter 2021, which missed the Zacks Consensus Estimate by 0.9%. Further, the figure improved 2.8% on a year-over-year basis, while coming in line with the prior-quarter figure.
Net revenues of $6.92 billion exhibited year-over-year growth of 13% on a FX-neutral basis and a reported basis. Further, the figure surpassed the Zacks Consensus Estimate of $6.88 billion and rose 11.9% sequentially.
Growing transaction and other value-added services’ revenues drove year-over-year revenues growth in the reported quarter. Also, accelerating U.S. revenues contributed well.
The strong performance by Venmo remained another positive. The growing total payment volume (“TPV”), courtesy of increasing net new active accounts, drove the results.
However, declining international revenues were concerning.
Top Line in Detail
By Type: Transaction revenues amounted to $6.4 billion (92% of net revenues), up 12% from the year-ago quarter. Other value-added services generated revenues of $541 million (accounting for 8% of net revenues), up 25% year over year.
By Geography: Revenues from the United States totaled $3.9 billion (56% of net revenues), up 27% on a year-over-year basis. International revenues were $3.02 billion (44% of revenues), down 1% from the prior-year quarter.
Key Metrics to Consider
PayPal witnessed year-over-year growth of 13% in total active accounts, with 9.8 million net new active accounts in the reported quarter. The total number of active accounts was 426 million in the quarter under review.
The total number of payment transactions was 5.3 billion, up 21% on a year-over-year basis.
The company’s payment transactions per active account were 45.4 million, which improved 11% from the year-ago quarter.
TPV amounted to $339.5 billion for the reported quarter, reflecting year-over-year growth of 23% on both spot rate and currency-neutral basis.
Notably, year-over-year growth in TPV was primarily driven by robust Venmo, which accounted for $60.6 billion of TPV, rising 29% on a year-over-year basis.
Operating Details
PayPal’s operating expenses were $5.9 billion in the fourth quarter, up 13.9% from the prior-year quarter. As a percentage of net revenues, the figure expanded 60 basis points (bps) on a year-over-year basis.
Non-GAAP operating margin was at 21.8%, contracting 290 bps from the year-ago quarter.
Balance Sheet & Cash Flow
As of Dec 31, 2021, cash equivalents and investments were $9.5 billion, down from $13.3 billion as of Sep 30, 2021.
PayPal had a long-term debt balance of $8.05 billion at the end of the fourth quarter compared with $7.9 billion at the end of the third quarter.
The company generated $1.8 billion of cash from operations, up from $1.5 billion in the previous quarter.
Free cash flow was $1.6 billion in the reported quarter compared with $1.3 billion in the prior quarter.
The company returned $1.5 billion to shareholders by repurchasing 8 million shares.
Guidance
For first-quarter 2022, PayPal expects year-over-year revenues growth of 6% on a current spot rate and a currency-neutral basis.
Non-GAAP earnings are expected to be 87 cents per share, including a benefit of 6 cents from credit loss reserve releases.
For 2022, PayPal anticipates year-over-year revenues growth of 15-17% at current spot rates as well as on a currency-neutral basis.
Non-GAAP earnings for 2021 are anticipated to be $4.60-$4.75 per share, which includes a benefit of 21 cents from credit loss reserve releases.
TPV for 2021 is likely to exhibit 19-22% growth on a spot rate basis. On a FX-neutral basis, TPV is expected to grow 21-23%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -27.6% due to these changes.
VGM Scores
Currently, Paypal has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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. It's no surprise Paypal has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.