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ETFs to Ride on PayPal's Q3 Outperformance

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PayPal Holdings Inc.’s (PYPL - Free Report) shares surged about 8.9% on Oct 24 after it beat on both counts in the third quarter. “PayPal’s 3Q19 results were the strongest we’ve seen in at least a year,” per an analyst. There was solid payment volume growth and expansion into China.

Quarter in Detail

PayPal Holdings delivered non-GAAP earnings of 61 cents per share in the third quarter of 2019, which surpassed the Zacks Consensus Estimate by 9 cents and rose 5.2% on a year-over-year basis.

Net revenues of $4.378 billion increased 19% from the year-ago quarter and 1.7% sequentially. Further, the figure was ahead of the Zacks Consensus Estimate of $4.341 billion. Solid performance of Venmo and One Touch drove the top line.


For fourth-quarter 2019, PayPal expects revenues between $4.89 billion and $4.95 billion, suggesting improvement in the range of 16-17% at the current spot rate and 17-18% on FX-neutral basis. The Zacks Consensus Estimate for the top line is $4.95 billion.

Non-GAAP earnings are anticipated in the range of 81-83 cents per share. The Zacks Consensus Estimate for the bottom line is 80 cents.

For 2019, PayPal revised its revenue outlook from $17.60-$17.80 billion to $17.70-$17.76 billion. Further, the company revised the non-GAAP earnings per share outlook downward from $3.12-$3.17 to $3.06-3.08. The Zacks Consensus Estimate for earnings is pegged at $2.96.

Initiative in China

The People’s Bank of China okayed PayPal’s acquisition of a 70% stake in Shanghai-based GoPay. The start-up has digital payment licenses in China. That deal is expected to be sealed in December and will make “PayPal the first licensed foreign-payment platform to operate there.”

ETFs in Focus

This can be a winning opportunity to enter into some ETFs that are heavy on PayPal.

First Trust US IPO Index Fund FPX — 5.60% exposure

The First Trust US Equity Opportunities ETF tracks the price and yield of the IPOX-100 U.S. Index. The fund comprises about 101 holdings, with PayPal occupying the highest spot. Its AUM is $1.23 billion and expense ratio is 0.59%.

Global X FinTech ETF FINX — 5.26% exposure

The fund seeks to deliver investment results that replicate the price and yield performance, before fees and expenses, of the Indxx Global FinTech Thematic Index. The fund comprises 35 holdings, with PayPal occupying the sixth position. Its AUM is $379.4 million and expense ratio is 0.68%.

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