A month has gone by since the last earnings report for Paypal (PYPL). Shares have lost about 12.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Paypal due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
PayPal Holdings reported fourth-quarter 2024 non-GAAP earnings of $1.19 per share, which surpassed the Zacks Consensus Estimate by 5.31% and climbed 4.4% year over year.
Net revenues of $8.366 billion increased 4.2% year over year on a reported basis and 7% on a forex-neutral basis. The figure beat the consensus mark by 1.67%.
The company’s non-GAAP operating margin contracted 30 bps on a year-over-year basis to 18%.
The total payment volume was $437.836 billion for the reported quarter, up 7% year over year, both on a reported basis and a forex-neutral basis. The reported figure beat the Zacks Consensus Estimate by 0.59%.
Transaction margin of $3.935 billion grew more than 7% on a reported basis.
Transaction revenues were $7.588 billion (90.7% of net revenues), up 4.2% year over year. Value Added Services revenues were $778 million (9.3% of net revenues), up 4.7% year over year.
Revenues from the United States totaled $4.518 billion (57% of net revenues), up 2% on a year-over-year basis. International revenues were $3.634 billion (43% of net revenues), up 7% year over year, both on a reported basis and forex-neutral basis.
PayPal witnessed year-over-year growth of 2% in total active accounts to 434 million in the reported quarter. The figure missed the Zacks Consensus Estimate by 0.05%.
The total number of payment transactions was 6.619 billion, down 3% on a year-over-year basis. The figure missed the consensus mark by 4.49%.
PYPL’s payment transactions per active account were 60.6 million, up 3% year over year.
PayPal’s operating expenses were $6.925 billion in the fourth quarter, up 10% year over year. As a percentage of net revenues, the figure increased 430 basis points (bps) on a year-over-year basis to 82.8%.
Transaction expense rate was 0.91% in the reported quarter compared with 0.97% reported in the year-ago quarter.
Transaction margin improved 120 bps to 47%.
As of Dec. 31, 2024, cash, cash equivalents and investments (including long-term) were $15.406 billion. The long-term debt balance was $9.879 billion.
PYPL generated $2.394 billion in cash from operations, while adjusted free cash flow was $2.098 billion in the fourth quarter.
The company returned $1.2 billion to shareholders through share repurchases. Moreover, PayPal authorized a new $15 billion stock repurchase program.
For 2025, PayPal now anticipates non-GAAP earnings between $4.95 per share and $5.10 per share.
Transaction margin is expected between $15.2 billion and $15.4 billion suggesting growth in the 4-5% range.
Non-GAAP non-transaction operating expenses are expected to grow in the low single-digit range.
Free cash flow is expected between $6 billion and $7 billion. Share repurchase is expected to be roughly $6 billion.
For the first quarter of 2025, PayPal expects non-GAAP earnings between $1.15 per share and $1.17 per share.
Transaction margin is expected between $3.6 billion and $3.65 billion, suggesting growth in the 4-5% range for the current quarter.
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, Paypal has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Paypal has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Paypal is part of the Zacks Financial Transaction Services industry. Over the past month, Visa (V), a stock from the same industry, has gained 0.9%. The company reported its results for the quarter ended December 2024 more than a month ago.
Visa reported revenues of $9.51 billion in the last reported quarter, representing a year-over-year change of +10.2%. EPS of $2.75 for the same period compares with $2.41 a year ago.
For the current quarter, Visa is expected to post earnings of $2.68 per share, indicating a change of +6.8% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.2% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Visa. Also, the stock has a VGM Score of D.
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PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
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