PayPal Holdings, Inc. PYPL reported non-GAAP earnings of $1.17 per share for first-quarter 2023, beating the Zacks Consensus Estimate by 6.4%. The figure improved 33% on a year-over-year basis.
Net revenues of $7.04 billion exhibited year-over-year growth of 10% on an FX-neutral basis and 9% on a reported basis. The figure surpassed the Zacks Consensus Estimate of $6.99 billion.
Growing transaction and other value-added services revenues drove the top line year over year in the reported quarter. Also, accelerating U.S. and international revenues contributed well.
Top Line in Detail
By Type: Transaction revenues amounted to $6.4 billion (90% of net revenues), up 6% from the year-ago quarter’s level. Other value-added services generated revenues of $676 million (accounting for 10% of net revenues), up 39% year over year.
By Geography: Revenues from the United States totaled $4.15 billion (59% of net revenues), up 13% on a year-over-year basis. International revenues were $2.9 billion (41% of net revenues), up 3% from the prior-year quarter’s level.
PayPal Holdings, Inc. Price, Consensus and EPS Surprise
PayPal Holdings, Inc. price-consensus-eps-surprise-chart | PayPal Holdings, Inc. Quote
Key Metrics to Consider
PayPal witnessed year-over-year growth of 1% in total active accounts, which came in at 433 million in the quarter under review.
The total number of payment transactions was 5.84 billion, up 13% on a year-over-year basis.
PYPL’s payment transactions per active account were 53.1 million, which improved 13% from the year-ago quarter’s level.
Total payment volume (TPV) amounted to $354.5 billion for the reported quarter, reflecting year-over-year growth of 10% on a spot rate basis and 12% on a currency-neutral basis.
PayPal’s operating expenses were $6.04 billion in the first quarter, up 4.7% from the prior-year quarter’s figure. As a percentage of net revenues, the figure contracted 323 basis points (bps) on a year-over-year basis.
The non-GAAP operating margin was 22.7%, expanding 201 bps from the year-ago quarter’s level.
Balance Sheet & Cash Flow
As of Mar 31, 2023, cash equivalents and investments were $10.7 billion, down from $10.9 billion as of Dec 31, 2022.
PayPal had a long-term debt balance of $10.5 billion at the end of the first quarter compared with $10.4 billion at the end of the fourth quarter.
PYPL generated $1.2 billion in cash from operations, down from $1.6 billion in the previous quarter.
Free cash flow was $1 billion in the reported quarter, down from $1.4 billion in the prior quarter.
PayPal returned $1.4 billion to its shareholders by repurchasing 19 million shares.
For second-quarter 2023, PayPal projects year-over-year revenue growth of 6.5%-7% on a spot rate basis and 7.5%-8% on a currency-neutral basis. The Zacks Consensus Estimate for revenues is pegged at $7.24 billion.
Non-GAAP earnings are expected to be in the range of $1.15-$1.17 per share, suggesting growth of 24-26% on a year-over-year basis. The Zacks Consensus Estimate for earnings is pegged at $1.18 per share.
For 2023, PayPal raised its guidance for non-GAAP earnings from $4.87 per share to $4.95, suggesting growth of 20% from the year-ago quarter. The Zacks Consensus Estimate for the same is pegged at $4.92 per share.
Zacks Rank and Stocks to Consider
Currently, PayPal carries a Zacks Rank #3 (Hold).
Investors interested in the broader technology sector can consider some better-ranked stocks like Agilent Technologies A, DigitalOcean DOCN and Paycor HCM PYCR, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Agilent Technologies is set to report second-quarter fiscal 2023 results on May 23. The Zacks Consensus Estimate for A’s earnings is pegged at $1.27 per share, implying growth of 12.4% from the year-ago quarter’s reported figure. A has lost 11.6% in the year-to-date period.
DigitalOcean is scheduled to release first-quarter 2023 results on May 9. The Zacks Consensus Estimate for DOCN’s earnings is pegged at 29 cents per share, suggesting a jump from 7 cents per share reported in the prior-year quarter. DOCN has gained 25.5% in the year-to-date period.
Paycor HCM is scheduled to report third-quarter fiscal 2023 results on May 10. The Zacks Consensus Estimate for PYCR’s earnings is pegged at 15 cents per share, suggesting an increase of 36.4% from the prior-year quarter’s reported figure. PYCR has gained 26% in the year-to-date period.
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