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PayPal (PYPL) Stock Dips Ahead of Q3 Earnings: What to Watch

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Shares of PayPal (PYPL - Free Report) slipped 0.65% during regular trading hours Wednesday just one day before the fintech firm is scheduled to release its third-quarter financial results. PYPL is currently in the midst of a turbulent six months, but that could change with a big Q3. So, let’s see what to expect from PayPal Today.

Overview

PayPal, which spun off from eBay (EBAY - Free Report) in 2015, boasts 244 million active account holders across approximately 200 markets. PayPal has also made a series of acquisitions recently. This includes its $2.2 billion acquisition of small business commerce firm iZettle, which has been referred to as the “Square of Europe.”

Meanwhile, PayPal’s peer-to-peer payment app Venmo rivals Square’s (SQ - Free Report) Cash app. Plus, the firm currently works with over 17 million business clients to offer an array of services. Investors should also note that PayPal and Walmart (WMT - Free Report) announced a new partnership that allows PayPal users to “cash in and cash out” at Walmart stores for a small service fee.

Outlook

Moving on, our current Zacks Consensus Estimate is calling for PayPal’s Q3 revenues to jump by 13.2% to hit $3.67 billion.At the other end of the income statement, PayPal’s adjusted quarterly earnings are projected to surge by approximately 17.4% to hit $0.54 per share. With that said, we still need to understand how likely PayPal is to top its quarterly earnings estimates.

Luckily, we can turn to our exclusive Earnings ESP figure to help us find out. The Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

PayPal is currently a Zacks Rank #1 (Strong Buy) that sports an earnings ESP of -0.18%. Unfortunately, this means our model is inconclusive about PYPL’s chances of topping our quarterly earnings estimate. However, the company has topped our quarterly earnings estimates in the trailing six quarters.

PayPal is scheduled to release its Q3 financial results after the market closes on Thursday, October 18.

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