Overview
PayPal’s Q2 earnings report is just around the corner, and investors are eagerly awaiting any signs of progress in reigniting earnings growth at the payment tech company. With Alex Chriss taking over as CEO from co-founder Dan Schulman less than a year ago, the pressure is on for Chriss to make his mark.
Earnings Expectations
PayPal is expected to earn adjusted EPS of $0.99 in Q2, down from $1.08 in Q1. However, with the first half of the year over, PayPal should have a better idea of how 2024 is shaping up. Wall Street analysts are expecting the company to increase its outlook for 2024, with the average analyst estimate for full-year adjusted EPS now standing at $4.16.
Key Metrics
- Total payment volume: $418.1B (Visible Alpha consensus), up from $403.9B in the prior quarter and $376.5B a year ago
- Total active accounts: 427M (Visible Alpha estimate), flat with Q1 and down from 431M in last year’s Q2
- Total operating expenses: $6.24B (Visible Alpha estimate), compared with $6.53B in the previous quarter and $6.15B a year ago
Analyst Sentiment
Wall Street analysts have been mixed on the stock, with William Blair and PhillipCapital downgrading the stock since its Q1 results. However, Susquehanna and Mizuho upgraded PayPal. Overall, Wall Street tilts bullish, with an average rating of Buy (15 Strong Buy, 8 Buy, 25 Hold). The average SA Analyst rating is also Buy (14 Strong Buy, 15 Buy, 7 Hold, 1 Sell).
Competitive Landscape
Much of the narrative regarding PayPal since Q1 has focused on ramped up competition from new features that Apple Pay is rolling out. However, Susquehanna Financial analyst James Friedman pointed to consumer-facing improvements increasing the value proposition for PYPL’s branded checkout.
Innovation and Growth
Early this year, the company rolled out new enhancements to revive growth, including features that apply AI to PayPal’s data, including a faster checkout. SA Analyst Noah’s Arc Capital Management is optimistic that PayPal’s Q2 will exceed expectations, citing the potential impact of Apple’s antitrust case in Europe.
Risks and Concerns
Wall Street analysts have been lowering their expectations for Q2 earnings, with the average estimate falling ~11% in the past three months and 25% in the past six months. SA Analyst Pearl Gray Equity and Research attributes the series of downward revisions to a “crowding” behavior, “which, whether for right or wrong, might’ve skewed estimates.” The analyst also notes PayPal’s Beneish M-Score, a metric used to detect earnings manipulation, has been trending downward since Q1 2023, indicating a higher likelihood of earnings manipulation.
