PayPal’s Promising Growth Amid Competitive Landscape
PayPal’s strong performance in the technology sector: PayPal (PYPL) shares boast a 39.8% return, outperforming the Zacks Computer and Technology sector’s return of 30.6% and the Zacks Internet Software industry’s gain of 31.7%.
The company’s robust portfolio underpins its solid relationships with both merchants and consumers. Its two-sided platform fosters strong financial connections between customers and merchants.
Total payment volume surged 9% year over year, climbing to $422.641 billion in Q3 2024 on both a spot-rate and forex-neutral basis.
Impressive One-Year Performance
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PayPal also marked a 1% year-over-year increase in total active accounts, reaching 432 million, while the number of payment transactions per account rose by 9% to 61.4 million.
Transaction margin reached $3.7 billion, rising more than 8% on a reported basis, buoyed by increased interest income and improvements in branded checkout, Venmo, and Braintree.
The use of Buy Now, Pay Later options increased between 15% and 20% during this period.
A Look at PayPal’s Share Valuation
PayPal is currently one of the lower-priced tech stocks, holding a Value Score of B.
PYPL shares are trading at a forward 12-month price-to-earnings (P/E) ratio of 17.77X, while the industry stands at 35.24X.
PYPL’s P/E Ratio (F12M)
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Additionally, PayPal shares are currently above both the 50-day and 200-day moving averages, signaling a bullish trend.
Performance Above 50-Day & 200-Day Moving Averages
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Strong Portfolio Fuels Growth
PayPal’s solid portfolio fuels its growth. The introduction of Fastlane allows customers to check out in one click, enhancing the shopping experience. Since its August launch, over 1,000 merchants have adopted Fastlane.
Fastlane, crafted from the company’s extensive payment proficiency, is currently available in the U.S. The launch of PayPal Complete Payments in regions like China and Hong Kong further extends PayPal’s reach among small and medium-sized businesses (SMBs), with plans for broader service expansion in 2025.
Growing Partnership Ecosystem
The expanding partnerships with firms such as Fiserv, Adyen, Amazon (AMZN), Global Payments, and Shopify (SHOP) enhance PayPal’s outlook. These collaborations are expected to drive greater adoption of Fastlane.
PayPal has become an additional processor for Shopify Payments in the U.S., facilitating a unified experience for businesses.
Additionally, PayPal’s collaboration with Amazon will enable Prime members to link their accounts for advantages while shopping, slated for 2025.
Noteworthy developments include PayPal’s integration with Apple Pay and Google Pay through the Venmo debit card, increasing its competitive edge.
PayPal remains a favored payment option for businesses and individuals within Meta Platforms (META) services, strengthening its market position.
Promising Outlook Ahead
Looking forward to 2024, PayPal anticipates non-GAAP earnings growth in the high teens, which is an upgrade from previous low to mid-teens guidance.
The Zacks Consensus Estimate aligns earnings at $4.57 per share—an increase of 2.93% in the last 60 days, yet a 10.39% decrease compared to the previous year’s figure. Current revenue estimates stand at $31.68 billion, reflecting a growth of 6.4% compared to the last year.
For the fourth quarter of 2024, PayPal forecasts low-single-digit revenue growth and a minor decline in non-GAAP earnings year-on-year. The revenue estimate is $8.24 billion, revealing a 2.66% year-over-year increase.
On the earnings front, the estimate stands at $1.10 per share, marking a potential decline of 25.68% from the prior year; however, this figure has remained stable recently.
Over the past four quarters, PYPL’s earnings have exceeded Zacks Consensus Estimates by an average surprise of 15.14%.
Investor Considerations for PYPL
Given its strong portfolio, growing partner network, and attractive valuation, PayPal presents an appealing option for long-term investors. Stakeholders may find the company’s growth potential rewarding.
Nevertheless, lower expected Braintree volume and revenue growth may affect performance heading into 2025. Increased marketing expenses are anticipated to influence profits in Q4 2024, with an increase in non-transaction operating expenses foreseen for 2024 and beyond.
Currently rated Zacks Rank #3 (Hold), investors may want to await a more opportune moment to enter the stock market.
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Discover further information on other companies, including Amazon.com, Inc. (AMZN), PayPal Holdings, Inc. (PYPL), Shopify Inc. (SHOP), and Meta Platforms, Inc. (META) with comprehensive analyses available from Zacks Investment Research.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
