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PayPal earnings: What to expect

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The world of online checkout continues to heat up, and investors want to see how digital-payments pioneer PayPal Holdings Inc. is holding its own.

After a rough year for PayPal
highlighted by economic pressures and a pandemic hangover, some analysts are now worried about whether the company is maintaining its share in the world of online checkout. This comes as third-party data indicate rising momentum for Apple Inc.’s
Apple Pay, which debuted years ago but seemed to find new fans during the COVID-19 crisis.

PayPal’s management team, for its part, has seemed more upbeat about the situation lately.

“I think we are holding or gaining slight share overall,” Chief Executive Dan Schulman said at a December investor conference. “When I look at our results, there’s a clear consumer preference to use PayPal” for online shopping.

Wall Street will get an updated read on the situation Thursday afternoon, when PayPal posts results for its holiday quarter. Here’s what to look for in that report.

What to expect

Earnings: Analysts tracked by FactSet expected PayPal to post $1.20 a share in adjusted earnings, up from $1.11 a share a year before. On Estimize — which crowdsources projections from hedge funds, academics, and others — the average estimate was $1.23 a share in adjusted earnings.

Revenue: The FactSet consensus called for $7.39 billion in fourth-quarter revenue, up from $6.92 billion a year before. Those contributing to Estimize anticipate $7.40 billion.

Total payment volume: Analysts tracked by FactSet were modeling $360.3 billion in total payment volume for the quarter, up from $339.5 billion on a year-over-year basis.

Stock movement: PayPal shares have fallen after four of the company’s last six earnings reports. The stock is off 34% over the past 12 months, as the S&P 500
has lost 9%.

Of the 49 analysts tracked by FactSet who cover PayPal’s stock, 36 had buy ratings, 12 had hold ratings, and one had a sell rating, with an average price target of $101.01.

What to watch for

“The main debate on PYPL is market share losses vs. Apple Pay,” Mizuho analyst Dan Dolev wrote recently.

So when PayPal reports results, investors will have to consider the extent to which trends reflect the company’s idiosyncratic performance and the extent to which they capture broader economic dynamics.

“While PYPL’s market share may not have materially deteriorated in January, slower e-commerce trends merit more caution,” Dolev wrote in a note to clients, following his analysis of web traffic for about 25 of PayPal’s large online checkout partners.

In his view, “the culprit is likely more [related to] macro/e-comm” than Apple Pay competition.

The company’s revenue forecast for the full year will also be in focus, with several analysts highlighting that the top-line outlook could come in below consensus expectations, which currently imply 8.5% growth for 2023.

The “buy-side seems already below the Street on 2023 revenues,” wrote Bernstein’s Harshita Rawat, who expected guidance of 6% to 8% revenue growth for the year.

JPMorgan’s Tien-tsin Huang noted that specifically when it comes to the outlook, investors will be paying attention to the company’s expected exit rate for the year.

He’ll also be looking for commentary on recent layoffs and any trade-offs they might bring.

“[W]hile a narrower investment focus was needed, it is our hope that PYPL will continue to pour adequate investment into key products,” he wrote. He likes the company’s in-app savings account, for one.


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