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How to Invest in PayPal's Strong Q1 Results Via ETFs

Sanghamitra Saha

Digital payment company PayPal PYPL came up with first-quarter 2017 financial results on April 26, after the bell.  The company reported adjusted earnings of $0.36 per share (including stock-based compensation expense), surpassing the Zacks Consensus Estimate of $0.33.

The company reported revenues of $2.975 billion, which came ahead of the Zacks Consensus Estimate of $2.934 billion and increased 17% year over year (or 19% on a currency-neutral basis).

Guidance Raised

PayPal has also beefed up its 2017 guidance and expects revenues to grow 15–17% on a currency-neutral basis to $12.520–$12.720 billion. Non-GAAP earnings per diluted share are estimated in the range of $1.74–$1.79. The previous guidance called for a profit of $1.74 a share, on revenues of $12.65 billion, as per Bloomberg.

GAAP earnings per diluted share for 2017 are estimated in the range of $1.28–$1.33. Earnings for Q2 are guided in the range of $0.41–$0.43 on revenues of $3.05 billion to $3.1 billion. Analysts estimated earnings of $0.42 per share on sales of $3.07 billion, as per Bloomberg.

The company also announced a $5 billion of stock buyback. Partnerships with Alphabet’s Google, several major retailers and financial institutions like Visa and Mastercard seem to be paying off (read: Buy These ETFs on Reduced Physical Banking).

Market Impact

The overall beat and an optimistic guidance boosted PYPL stock by about 6.2% in the key trading session on April 27. The stock also gained about 0.3% after hours. While investing in the PayPal stock is definitely an option to play the potential boom, an ETF route also offers investors a less risky and diversified approach.We have detailed below five such ETFs that have considerable exposure to PayPal:

Guggenheim Spin-Off ETF CSD

This ETF offers targeted exposure to U.S. companies that were spun off within the last four years. The fund has amassed $203 million in its asset base. Expense ratio comes in at 0.65%. From a sector look, Information Technology takes the top position. In-focus PayPal occupies about 7.93% share of the fund. CSD added over 0.4% on April 27.

Purefunds ISE Mobile Payments ETF IPAY

This ETF tracks the ISE Mobile Payments Index to provide exposure to the performance of companies engaged in the mobile/electronic payments business. This approach results in the fund holding a basket of 31 stocks. PayPal gets 5.96% weight of the fund. It charges 75 bps in fees and has amassed about $95 million in assets. IPAY was up about 0.1% on April 27.

FinTech Thematic ETF FINX

This $2.5-million fund also looks to track companies belonging to the emerging financial technology sector. PayPal Holdings gets 5.53% exposure of the fund. The 29-stock fund puts about 43% weight in the data processing & outsourced services while application software (35.2%) and Internet software & services (6.5%) round out the next two spots. FINX was up about 1.2% on April 27 (read: Forget IBM, Buy These Thematic Tech ETFs Instead).

First Trust US Equity Opportunities ETF FPX

This ETF targets the U.S. IPO market and follows the IPOX-100 U.S. Index. It has accumulated $735.4 million in its asset base and charges 60 bps in fees a year. In total, the fund holds 101 securities in its basket with 5.08% share going to PayPal Holdings. FPX was up over 0.4% on April 27.

First Trust Dow Jones Internet Index FDN

This Internet fund charges 54 bps in fees per year. In total, the fund holds 42 stocks in its basket with the in-focus PayPal Holdings taking the seventh spot with 4.64% share. This $4.2-billion fund was up over 0.8% on April 27, 2017 (read: eBay Slumps Despite Q1 Beat: Buy the Dip via ETFs?).

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PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report
 
FT-DJ INTRNT IX (FDN): ETF Research Reports
 
PF ISE MOBLPAY (IPAY): ETF Research Reports
 
FT-IPOX 100 (FPX): ETF Research Reports
 
GLBL-X FINTECH (FINX): ETF Research Reports
 
GUGG-SPIN-OFF (CSD): ETF Research Reports
 
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