PayPal Beats Earnings Expectations But Revenue Growth Slows, Stock Dips Premarket
PayPal Holdings Inc. (PYPL) reported a mixed bag of results for the third quarter of 2024, with earnings exceeding expectations but revenue growth slowing slightly. The company’s stock dipped in premarket trading following the release.
Despite the slight miss on revenue, PayPal delivered a strong earnings performance, with adjusted EPS reaching $1.20, surpassing analyst estimates of $1.07. Revenue for the quarter clocked in at $7.85 billion, a year-over-year increase of 6%, but narrowly missing the consensus of $7.88 billion.
Despite the slower revenue growth, PayPal saw a significant increase in total payment volume, rising 9% year-over-year to $422.6 billion. Payment transactions also climbed 6% to $6.6 billion, while the number of payment transactions per active account rose by 9% on a trailing 12-month basis, reaching $61.40.
However, the company’s total active accounts decreased by 0.9% to 432 million, although this was offset by a sequential increase of 0.6%, or 2.6 million accounts.
PayPal’s operational performance was robust, with the operating margin expanding by 198 basis points to 17.7%, and the adjusted operating margin increasing by 194 basis points to 18.8%. The company generated $1.6 billion in operating cash flow and $1.4 billion in free cash flow during the quarter. As of September 30, 2024, PayPal held $16.2 billion in cash and equivalents, with a debt balance of $12.40 billion.
Looking ahead, PayPal expects a low-single-digit percentage revenue increase in the fourth quarter, compared to $8.03 billion in the previous year’s period. This forecast falls slightly below the consensus of $7.81 billion. The company projects adjusted EPS to decrease by a low- to mid-single-digit percentage, reaching $1.03-$1.07, compared to $1.14 in the previous year’s quarter and the consensus of $1.10.
For the full year 2024, PayPal anticipates adjusted EPS to increase by a high teens percentage, reaching $3.92-$3.96, compared to $3.83 in the previous year. This forecast is slightly higher than the previous low-mid-teens percentage projection. Current analyst estimates call for an EPS of $4.46 per share.
During the conference call, PayPal’s CEO expressed optimism about the growth of the company’s Buy-Now-Pay-Later (BNPL) offering, predicting a 15% to 20% increase in usage. The CFO also highlighted strong consumer sentiment based on holiday quarter spending trends, stating, “Consumer Feels Strong At This Point.”
PayPal Holdings stock has gained over 36% year-to-date. However, in premarket trading on Tuesday, PYPL stock was down by 1.11% at $82.66.
Despite the mixed results, PayPal continues to demonstrate its commitment to expanding its BNPL offerings and remains optimistic about the future, with strong consumer spending supporting its outlook. However, investors will be closely watching the company’s revenue growth trajectory in the coming quarters.
