PayPal Gears Up for Q3 2024 Earnings Report
PayPal (PYPL) will release its third-quarter 2024 financial results on October 29.
Revenue Growth and Earnings Outlook
PYPL is anticipating mid-single-digit revenue growth year-over-year for the upcoming quarter. Analysts expect non-GAAP earnings to increase at a high-single-digit rate compared to last year.
According to the Zacks Consensus Estimate, the expected revenues for Q3 are $7.86 billion, marking a 5.93% rise from the same quarter last year.
The consensus estimate for earnings is set at $1.08 per share, reflecting a minor uptick over the past month but a significant decline of 16.92% from the previous year’s figures.
Notably, PayPal has beaten the Zacks Consensus Estimate in each of the last four quarters, with an average earnings surprise of 14.00%.
PayPal Holdings, Inc. Price and EPS Surprise
PayPal Holdings, Inc. price-eps-surprise | PayPal Holdings, Inc. Quote
Find the latest EPS estimates and surprises on Zacks Earnings Calendar
Let’s explore the factors influencing the upcoming announcement.
Strengthening Merchant Relationships
The impending Q3 results are expected to showcase PayPal’s robust portfolio, which enhances its relationships with merchants and consumers alike.
Venmo’s effective monetization strategies likely contributed positively to Total Payments Volume (TPV), which was reported at $416.81 billion in Q2 2024, reflecting an 11% year-over-year growth when adjusted for spot rates and currency.
PayPal’s partnerships with companies like Apple (AAPL) and Meta Platforms (META) have notably bolstered its growth. The integration of PayPal and Venmo debit or credit cards into Apple Wallet stands out as a major milestone.
The launch of Tap to Pay on iPhone, aimed at Venmo and Zettle users, has likely increased PayPal’s appeal among small businesses this quarter.
Similarly, rising popularity of Tap to Pay on Android has probably expanded Venmo and Zettle’s user base.
Moreover, PayPal remains a preferred payment method worldwide for consumers and advertisers linked to Meta Platforms, where creators and developers utilize Hyperwallet, while Braintree supports Meta with credit card processing.
Enhancements in User Experience
PayPal continually enhances user experience through innovative features like PayPal Pay Later and its integration with Apple Pay. These improvements streamline payment processing for small businesses.
The ongoing rollout of PayPal Commerce Platform (PPCP) has been advantageous for small and medium-sized businesses (SMBs). In the first half of the year, SMB volume using PPCP surged by over 40%, a trend that likely continued into the latter half.
Additionally, Xoom’s growing acceptance is commendable. Its Debit Card Deposit feature allows U.S. users to send money securely to eligible Visa debit cards of friends and family.
Overall advancements in checkout experiences are expected to further support PayPal’s growth among large enterprises in this upcoming quarter.
Stock Performance and Valuation
Year-to-date, PayPal shares have risen by 32.6%, surpassing the Zacks Computer & Technology sector’s 25.3% and the Zacks Internet Software Industry’s 21.4% increases.
In comparison, shares of its competitor, Block (SQ), have declined by 6.2% this year.
Year-to-Date Performance Chart
Image Source: Zacks Investment Research
PayPal appears undervalued, as indicated by its Value Score of B.
Currently, PYPL’s forward 12-month Price/Sales ratio stands at 2.46X, which is less than the broader sector’s 6.14X and the industry’s 2.67X.
Price/Sales (P/S) Ratio
Image Source: Zacks Investment Research
Long-Term Investment Potential
PayPal stands out as a strong contender in the global digital payments market, bolstered by its solid brand, innovative technologies, and responsiveness to market shifts.
Its dual-sided platform is poised to enhance customer and merchant interactions, reinforcing its market dominance.
The general rollout of Fastlane in August further positions PayPal for potential revenue growth.
Additionally, in-app offers with major retailers, including Best Buy, Priceline, Lyft, Instacart, Ticketmaster, Walmart, and Nordstrom, aim to boost consumer activity and elevate gross merchandise volume for PayPal.
Investment Recommendations for PayPal
With increasing demand for peer-to-peer payments and digital wallets, investors holding PayPal stock may find long-term growth promising.
However, prospective challenges, including tough economic conditions, unfavorable currency fluctuations, and sluggish consumer spending, cast a shadow on near-term outlooks. Moreover, with modest growth expectations and stretched valuations, the stock carries some investment risks, as reflected by its Growth Score of D.
PayPal currently holds a Zacks Rank #3 (Hold), signaling that investors should consider waiting for a more opportune time to enter the stock. For a full list of Zacks #1 Rank (Strong Buy) stocks, click here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
