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PayPal Surges on Upbeat Q2 Outlook: ETFs to Benefit

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PayPal Holdings Inc.’s (PYPL - Free Report) shares surged about 14% on May 7 after it announced that May 1 witnessed a record day of transactions that surpassed last year's Black Friday and Cyber Monday. Also, upbeat outlook and transaction surge in April helped shares shoot up post earnings (read: Bet on Digital Payments With These ETFs and Stocks).

Quarter in Detail

PayPalreported non-GAAP earnings of 66 cents per share in first-quarter 2020, which missed the Zacks Consensus Estimate by 12%. The figure remained flat on a year-over-year basis.

Increasing credit loss reserves owing to revised macroeconomic projections on account of the coronavirus pandemic impacted the bottom line by $0.17 per share.

Net revenues of $4.62 billion lagged the Zacks Consensus Estimate of $4.74 billion. The figure improved 12% from the year-ago quarter on a reported basis and 13% on FX-neutral basis.

Transaction revenues came in at $4.2 billion (91% of net revenues), up 13% from the year-ago quarter. Other value-added services generated $403 million of revenues (accounting for 9% of net revenues), increasing 2% year over year.

PayPal witnessed year-over-year growth of 17% in total active accounts with the addition of 20.2 million net new active accounts during the reported quarter. The shopping and rewards platform Honey buyout was a major positive in this regard as it alone added 10.2 million accounts in January. Total number of active accounts was 325 million in the quarter, which surpassed the Zacks Consensus Estimate of 311 million.

Guidance

While the company withdrew full-year guidance for the first quarter, it offered second-quarter guidance. For second-quarter 2020, PayPal expects revenues to reflect year-over-year improvement in the range of 13% at current spot rate and 15% at FX-neutral basis. The Zacks Consensus Estimate for revenues is pegged at $4.81 billion. Non-GAAP earnings are anticipated to grow in the range of 15-20%. The Zacks Consensus Estimate for earnings stands at 79 cents per share.

Management also noted that “daily number of transactions accelerated throughout the month growing from the beginning of April until month end by 25% with 7.4 million net new actives, record engagement and transaction volumes, and 20% revenue growth."

ETFs in Focus

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

ETFMG Prime Mobile Payments ETF (IPAY - Free Report) — 8.18% exposure

PayPal is the top stock in the fund, followed by Visa. The fund tacked on about 3.9% gains on May 7.

First Trust US IPO Index Fund (FPX - Free Report) — 6.38% exposure

PayPal occupies the second highest spot. The fund advanced about 3% on May 7.

Global X FinTech ETF (FINX - Free Report) — 5.97% exposure

PayPal occupies the third highest position. The ETF gained about 3.1% on May 7.

SPDR SSGA Gender Diversity Index ETF (SHE - Free Report) — 5.99% exposure

PayPal takes about 5.98% of the basket. The fund added about 3% on May 7.

Tortoise Digital Payments Infrastructure Fund (TPAY - Free Report) — 5.42% exposure

PayPal is the second position holder of the fund. The fund gained 3.16% on May 7.           

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