How Should Investors Approach PayPal Shares Post Q3 Earnings?

PayPal Holdings PYPL reported third-quarter 2024 non-GAAP earnings of $1.20 per share, which surpassed the Zacks Consensus Estimate by 11.11% and jumped 22.4% year over year.PYPL’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, which is commendable.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Net revenues of $7.847 billion increased 6% year-over-year, both on a forex-neutral basis and reported basis. However, the figure lagged the consensus mark by 0.20%.Transaction margin of $3.7 billion grew more than 8% on a reported basis and more than 6% ex-interest on customer balances, driven by higher interest income, branded checkout, Venmo, Braintree, and tech-led risk/loss improvements. PayPal Holdings, Inc. Price, Consensus and EPS Surprise PayPal Holdings, Inc. price-consensus-eps-surprise-chart | PayPal Holdings, Inc. Quote PYPL raised its 2024 non-GAAP earnings guidance following the robust third-quarter performance, which bodes well for investors. PayPal shares have appreciated 28.2% year to date (YTD), outperforming the Zacks Computer & Technology sector’s return of 27.6%.PYPL Outperforms Sector in YTD Image Source: Zacks Investment Research Before diving down into PYPL’s investment prospects, let’s take a glance at its quarterly numbers.PYPL’s Revenues Ride on Strong Payment VolumeThe total payment volume was $422.641 billion for the reported quarter, up 9% year over year, both on a spot-rate basis and forex-neutral basis. The reported figure beat the Zacks Consensus Estimate by 0.31%.Transaction revenues were $7.067 billion (90.1% of net revenues), up 6.2% year over year. Value-Added Services revenues were $780 million (9.9% of net revenues), up 2.1% year over year.Revenues from the United States totaled $4.518 billion (58% of net revenues), up 6% on a year-over-year basis. International revenues were $3.329 billion (42% of net revenues), up 5% year over year on a reported basis and 6% on a forex-neutral basis.PayPal witnessed year-over-year growth of 1% in total active accounts to 432 million in the reported quarter. The figure topped the Zacks Consensus Estimate by 0.48%.The total number of payment transactions was 6.631 billion, up 6% on a year-over-year basis. The figure missed the consensus mark by 4.22%.PYPL’s payment transactions per active account were 61.4 million, up 9% year over year.PayPal’s operating expenses were $6.456 billion in the third quarter, up 3.3% year over year. As a percentage of net revenues, the figure declined 200 basis points (bps) on a year-over-year basis to 82.3%.Transaction expense rate was 0.91% in the reported quarter compared with 0.93% reported in the year-ago quarter. Transaction margin improved 120 bps to 46.6%. The non-GAAP operating margin expanded 200 bps on a year-over-year basis to 19%.PYPL’s Balance Sheet Remains StrongAs of Sept. 30, 2024, cash, cash equivalents and investments (including long-term) were $16.2 billion. The long-term debt balance was $9.976 billion.PYPL generated $1.614 billion in cash from operations, while free cash flow was $1.54 billion in the third quarter.It returned $1.8 billion to shareholders through share repurchases.PayPal Raises FY24 Earnings GuidanceFor 2024, PayPal now anticipates non-GAAP earnings to see high teens growth (up from previous guidance of low to mid-teens growth) over 2023. The Zacks Consensus Estimate for earnings is pegged at $4.44 per share, suggesting a 12.94% decline over 2023’s reported figure. The consensus mark for revenues is currently pegged at $31.93 billion, indicating 7.27% growth over the 2023 reported figure.PayPal expects transaction margin dollar growth in the mid-single-digits for 2024.For the fourth quarter of 2024, PayPal expects low-single-digit revenue growth. The Zacks Consensus Estimate for revenues is pegged at $8.49 billion, indicating 5.76% year-over-year growth.Non-GAAP earnings is expected to exhibit low to mid-single-digit decrease on a year-over-year basis. The Zacks Consensus Estimate for earnings is pegged at $1.10 per share, indicating a 25.68% decline from the figure reported in the year-ago quarter.Expanding Portfolio, Rich Partner Base Aid PYPL’s ProspectsPYPL’s portfolio strength has been helping it maintain deep and trusted relationships with merchants and consumers. Its two-sided platform helps develop direct financial relationships with customers and merchants.PayPal’s unveiling of Fastlane, which enhances the guest checkout experience by allowing users to complete their purchase in one click, remains noteworthy. Currently, it is available in the United States. Fastlane is based on the company's decades of payment expertise to innovate and accelerate the guest checkout experience.PayPal’s expanding partner base is driving prospects. Its collaboration with Apple AAPL and Alphabet GOOGL to integrate the Venmo debit card with Apple Pay and Google Pay has been a noteworthy development.PayPal is a top payment method for advertisers and consumers globally across Meta Platforms’ META family of apps. Creators and developers are using Hyperwallet. META also uses Braintree for credit card processing.PayPal Shares Trade at a DiscountPayPal is trading at a discount with a forward 12-month Price/Sales of 2.42X compared with the industry’s 2.75X. This indicates robust opportunities for investors.PYPL’s Value Score of B is hard to ignore.Price/Sales Ratio (F12M) Image Source: Zacks Investment Research ConclusionPayPal rides on growing demand for peer-to-peer payments and digital wallets. Hence, investors who already own the stock may expect PYPL's growth prospects to be rewarding over the long term.However, PYPL’s near-term prospects are challenging due to challenging macroeconomic conditions and sluggish consumer spending. Its modest growth prospects make it a risky bet for investors, as indicated by a Growth Score of D.PayPal currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Apple Inc. (AAPL): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis Report PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report Meta Platforms, Inc. (META): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks