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PayPal (PYPL) to Report Q4 Earnings: What's in the Cards?

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PayPal Holdings, Inc. (PYPL - Free Report) is set to report fourth-quarter 2018 results on Jan 30.

The company outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering average positive earnings surprise of 5.58%.

In the last reported quarter, PayPal’s earnings of 58 cents per share grew 26.1% on a year-over-year basis. The company also delivered a positive earnings surprise of 7.41%.

Moreover, net revenues increased 14% year over year to $3.68 billion, beating the Zacks Consensus Estimate of $3.66 billion.

Improving total active accounts on the back of expanding customer base drove year-over-year growth. Moreover, the growing number of strategic acquisitions remained positive throughout the quarter.

For fourth-quarter 2018, PayPal expects revenues between $4.19 billion and $4.27 billion. Non-GAAP earnings are anticipated within 65-67 cents per share.

Let’s see how things are shaping up for the to-be-reported quarter.

Key Metrics to Consider

Active customer accounts and total payment volume (“TPV”) form the basis of PayPal’s business. The company has been recording massive growth in these two metrics over the past several quarters.

For the fourth quarter, the Zacks Consensus Estimate for active customer accounts is pegged at 263, which reflects year-over-year growth of 16.9%. Further, the Zacks Consensus Estimate for TPV is pegged at $164.9 billion, reflecting an improvement of 27.3% from the year-ago quarter.

PayPal is currently riding on its well-performing Venmo, Choice and One Touch, which are aiding the expansion of its customer base. Further, the company’s strengthening presence in the global market and strategic partnerships are major positives.

Additionally, strengthening merchant base and rapidly increasing mobile payment volume, driven by growing smartphone penetration and internet usage on a global basis, are driving the adoption rate of its payment solutions.

All these factors have led to the upswing in the above-mentioned metrics.

Other Initiatives

In the to-be-reported quarter, the company has taken many initiatives that are likely to drive the upcoming quarterly results.

During the third quarter, PayPal announced the partnership with Itau Unibanco Holding SA. This will allow PayPal to gain traction among the bank’s customers by offering them services, in turn expanding top-line growth.

Further, the company’s money transfer service, Xoom, expanded operations to Canada. Local customers can now send money, make bill payments or reload their phones in more than 130 countries internationally at a better rate.

It also announced the acquisition of a payout platform, Hyperwallet. Notably, the deal will likely give PayPal access to more than 200 markets, further enhancing payment distribution capabilities.

We believe that these strong endeavors will keep strengthening the customer base of the company, in turn driving top-line growth.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

PayPal currently has a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

PayPal Holdings, Inc. Price and EPS Surprise

 

PayPal Holdings, Inc. Price and EPS Surprise | PayPal Holdings, Inc. Quote

Stocks to Consider

You may consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank.

Twitter, Inc. has an Earnings ESP of +13.03% and a Zacks Rank #1.

Square, Inc. (SQ - Free Report) has an Earnings ESP of +6.6% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lumentum Holdings Inc. (LITE - Free Report) has an Earnings ESP of +1.1% and a Zacks Rank #2.

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