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ETFs in Focus on PayPal's (PYPL) Mixed Q2 Earnings

Sweta Jaiswal, FRM

PayPal Holdings, Inc. PYPL reported an earnings beat and revenue miss for second-quarter 2019 on Jul 24, after the market closed. The company has also lowered the revenue guidance for 2019. Since the earnings release, PayPal has lost 4.8% to close at $115.49 on Jul 26.

Earnings in Focus

PayPal reported non-GAAP earnings of 86 cents per share in the second quarter of 2019, which beat the Zacks Consensus Estimate by 11 cents and rose 48.3% on a year-over-year basis. The company’s investment in MercadoLibre MELI, Uber Technologies UBER and others acted as primary drivers during the quarter.

PayPal reported net revenues of $4.305 billion, up 12% from the year-ago period. However, the metric lagged the Zacks Consensus Estimate of $4.333 billion. Strength in Venmo and One Touch drove revenue growth over the  year-ago period. Moreover, rapidly rising net new active accounts and solidifying customer engagement on the company’s platform also drove the top line. However, sale of the U.S. consumer credit receivables portfolio to Synchrony continued to dent top-line results.

PayPal revised revenues outlook for 2019 from $17.85-$18.1 billion to $17.60-$17.80 billion. Further, the growth rate declined from 16-17% to 14-15%, at both current spot rates and on forex-neutral basis. Moreover, the company revised non-GAAP earnings per share outlook upward from $2.94-$3.01 to $3.12-$3.17.

Business Update

PayPal saw year-over-year growth of 17% in total active accounts with the addition of 9 million net new active accounts during the second quarter. The total number of active accounts was 286 million in the reported quarter. Moreover, the total number of payment transactions came in at 2.973 billion, up 28% on a year-over-year basis.

Further, the company’s payment transactions per active user were 39 million, which rose 9.2% from the year-ago quarter indicating solid customer engagement on PayPal’s platform.

ETFs in Focus

Investors might like to take a look at some ETFs with exposure to the global technology platform and digital payments leader:

First Trust US IPO Index Fund FPX — 8.66% exposure

The First Trust US Equity Opportunities ETF tracks the price and yield of the IPOX-100 U.S. Index. The fund comprises 101 holdings, with PayPal occupying the highest spot. Its AUM is $1.29 billion and expense ratio is 0.59%. Since PayPal’s earnings release, the fund has gained 0.52% to close at $81.43 on Jul 26 (read: IPO ETF Returns Double the S&P 500 in 1H: What Next?).

Guggenheim Spin-Off ETF CSD — 7.18% exposure

The fund is based on the S&P U.S. Spin-Off Index, which is made up of companies that have been spun off from larger corporations within the past four years. The fund comprises 42 holdings, with PayPal occupying the sixth position. Its AUM is $131.6 million and expense ratio 0.64%. Since the earnings release, the fund has lost 1.5% to close at $49.65 on Jul 26.

Global X FinTech ETF FINX — 5.22% exposure

The fund seeks to deliver investment results that replicate the price and yield performance, before fees and expenses, of the Indxx Global FinTech Thematic Index. The fund comprises 35 holdings, with PayPal occupying the eighth position. Its AUM is $459.3 million and expense ratio is 0.68%. Since the earnings release, the fund has gained 1.4% to close at $31.23 on Jul 26 (read: S&P 500 Hits New High: 10 Top-Performing ETFs YTD).

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MercadoLibre, Inc. (MELI) : Free Stock Analysis Report
 
PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report
 
First Trust US Equity Opportunities ETF (FPX): ETF Research Reports
 
Global X FinTech ETF (FINX): ETF Research Reports
 
Uber Technologies, Inc. (UBER) : Free Stock Analysis Report
 
Invesco S&P Spin-Off ETF (CSD): ETF Research Reports
 
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