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PayPal (PYPL) to Post Q3 Earnings: What's in the Offing?

Shilpa Mete
·4 min read

PayPal Holdings, Inc. PYPL is scheduled to report third-quarter 2020 results on Nov 2.

For third quarter, PayPal expects revenues to reflect year-over-year improvement in the range of 23% at current spot rate and 25% at FX-neutral basis. The Zacks Consensus Estimate for revenues is pegged at $5.4 billion, indicating an improvement of 23.4% from the prior-year quarter.

The company anticipates non-GAAP earnings to grow by 25%. The Zacks Consensus Estimate for earnings stands at 94 cents per share, suggesting a growth of 54.1% from the year-ago reported figure.

Notably, the company surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same once. It has a trailing four-quarter earnings surprise of 9.08%, on average.

PayPal Holdings, Inc. Price and EPS Surprise

PayPal Holdings, Inc. Price and EPS Surprise
PayPal Holdings, Inc. Price and EPS Surprise

PayPal Holdings, Inc. price-eps-surprise | PayPal Holdings, Inc. Quote

Factors at Play

PayPal’s persistent efforts toward strengthening the services portfolio are likely to have aided the company in gaining traction across customers in the third quarter.

The company made the PayPal Business Debit Mastercard available in five European countries, which include Ireland, Italy, Spain, Austria and France in the soon-to-be-reported quarter. This is likely to get reflected in the third-quarter results.

Further, the company’s third-quarter results are likely to reflect gains from the strength in product lines, including Venmo and One Touch. Moreover, Venmo and One Touch are expected to have contributed to growth in its net new active accounts.

Further, these two products are known for accelerating customer engagement on PayPal’s platform, which is expected to have bolstered total active accounts in the to-be-reported quarter.

Additionally, the growing momentum of core peer to peer and PayPal Checkout experiences are anticipated tohave remained a tailwind.

Further, the new QR Code Payment facility, which ensures touch-free payment service, is likely to have gained strong traction among customers during the coronavirus-hit third quarter.

Additionally, acquisitions of Honey, iZettle, Hyperwallet, GoPay and Xoom, which have bolstered PayPal’s digital payment capabilities, are expected to have contributed to the to-be-reported quarter’s performance.

Key Metrics to Consider

Total payment volume (TPV), active customer accounts, payment transactions per active account and thetotal number of payment transactions are considered to be the key metrics for analyzing PayPal’s business growth.

For the third quarter, the Zacks Consensus Estimate for active customer accounts is pegged at 363 million, up 23.1% from the year-ago quarter’s reported figure.

The consensus mark for payment transactions per active user is pegged at 39.79 million, suggesting a slight decline of 0.02% from the year-ago quarter’s reported number.

Further, the consensus estimate for the total number of payment transactions stands at 3.9 billion, indicating an improvement of 26.4% from the prior-year quarter’s reported figure.

Furthermore, the Zacks Consensus Estimate for TPV is pegged at $232.6 billion, suggesting growth of 30.2% on a year-over-year basis.

What Our Model Says

Our proven model conclusively predicts an earnings beat for PayPal this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

PayPal has an Earnings ESP of +1.14% and a Zacks Rank #3.

Other Stocks to Consider

Here are some other stocks you may consider, as our proven model shows that thesetoo have the right combination of elements to post an earnings beat this quarter.

MercadoLibre, Inc. MELI has an Earnings ESP of +269.05% and carries a Zacks Rank of 1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

ON Semiconductor Corp. ON has an Earnings ESP of +7.94% and carries a Zacks Rank of 2, currently.

Revolve Group, Inc. RVLV has an Earnings ESP of +4.65% and a Zacks Rank #2.

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