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PayPal (PYPL) Q2 Earnings Beat Estimates, Revenues Rise Y/Y

PayPal Holdings, Inc. PYPL reported non-GAAP earnings of 93 cents per share in second-quarter 2022, beating the Zacks Consensus Estimate by 9.4%. However, the figure declined 19.1% on a year-over-year basis.

Net revenues of $6.81 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 $6.76 billion.

Growing transaction and other value-added services’ revenues drove year-over-year revenue growth in the reported quarter. Also, accelerating U.S. revenues contributed well.

The strong performance by Venmo was another positive.

However, declining international revenues were concerning.

PayPal Holdings, Inc. Price, Consensus and EPS Surprise

 

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

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

Top Line in Detail

By Type: Transaction revenues amounted to $6.3 billion (932% of net revenues), up 8% from the year-ago quarter. Other value-added services generated revenues of $534 million (accounting for 8% of net revenues), up 21% year over year.

By Geography: Revenues from the United States totaled $3.9 billion (57% of net revenues), up 18% on a year-over-year basis. International revenues were $2.9 billion (43% of net revenues), down 1% from the prior-year quarter.

Key Metrics to Consider

PayPal witnessed year-over-year growth of 6% in total active accounts, with 0.4 million net new active accounts in the reported quarter. The total number of active accounts was 429 million in the quarter under review.

The total number of payment transactions was 5.5 billion, up 16% on a year-over-year basis.

The company’s payment transactions per active account were 48.7 million, which improved 12% from the year-ago quarter.

Total payment volume (TPV) amounted to $339.8 billion for the reported quarter, reflecting year-over-year growth of 9% on a spot rate basis and 13% on a currency-neutral basis.

Notably, year-over-year growth in TPV was primarily driven by robust Venmo, which accounted for $61.4 billion of TPV, rising 6% on a year-over-year basis.

Operating Details

PayPal’s operating expenses were $6.04 billion in the second quarter, up 18.2% from the prior-year quarter. As a percentage of net revenues, the figure expanded 690 basis points (bps) on a year-over-year basis.

The non-GAAP operating margin was 19%, contracting 800 bps from the year-ago quarter.

Balance Sheet & Cash Flow

As of Jun 30, 2022, cash equivalents and investments were $9.3 billion, up from $7.9 billion as of Mar 31, 2022.

PayPal had a long-term debt balance of $10.2 billion at the end of the second quarter compared with $8.2 billion at the end of the first quarter.

The company generated $1.5 billion of cash from operations, up from $1.2 billion in the previous quarter.

Free cash flow was $1.3 billion in the reported quarter, up from $1.1 billion in the prior quarter.

The company returned $750 million to shareholders by repurchasing 8 million shares.

Guidance

For third-quarter 2022, PayPal projects revenues at $6.8 billion, suggesting year-over-year growth of 10% on a current spot rate basis and 12% on a currency-neutral basis. The Zacks Consensus Estimate for revenues is pegged at $6.94 billion.

Non-GAAP earnings are expected to be 94-96 cents per share. The Zacks Consensus Estimate for earnings is pegged at $94 per share.

For 2022, PayPal projects revenues at $27.85 billion, indicating growth of 10% on a spot rate and 11% on a currency-neutral basis. The Zacks Consensus Estimate for 2022 revenues is pegged at $28.03 billion.

The company revised the non-GAAP earnings guidance upward from $3.81-$3.93 per share to $3.87-$3.97 per share. The Zacks Consensus Estimate for the same is pegged at $3.83 per share.

TPV for 2022 is likely to exhibit growth of 12% on a spot rate basis and 16% on a currency-neutral basis.

Zacks Rank and Stocks to Consider

Currently, PayPal carries a Zacks Rank #4 (Sell).

Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like MACOM Technology Solutions MTSI, Keysight Technologies KEYS and Asure Software ASUR, 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.

MACOM has lost 26% in the year-to-date period. The long-term earnings growth rate for MTSI is currently projected at 16.2%.

Keysight Technologies has lost 20.9% in the year-to-date period. KEYS’ long-term earnings growth rate is currently projected at 9.1%.

Asure Software has lost 29.6% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 14%.


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