PayPal Earnings: What to Expect

In May, financial technology company PayPal (NASDAQ:PYPL) impressed investors with robust first-quarter results, kicking the year off with a bang. Not only did the company’s top and bottom lines come in ahead of analyst expectations, but management lifted its outlook for the full year. The strong results came as total payment volume processed by the company soared to $285 billion. 

Unsurprisingly, this strong business momentum has helped the growth stock’s price. Shares are up 68% over the past 12 months and 17% over the past three.

Investors interested in the stock should mark their calendars for July 28 — the date the company has set to announce its second-quarter results. 

A woman sends money with the PayPal app

Sending money with the PayPal app. Image source: PayPal.

Top- and bottom-line momentum

Investors should note that PayPal had some incredible top-line momentum going into its second quarter. First-quarter revenue rose 29% year over year, helped primarily by a 50% jump in total payment volume (TPV). Total revenue for the period was $6.03 billion, beating analysts’ average forecast for revenue of $5.90 billion. Non-GAAP earnings per share soared from $0.66 in the year-ago period to $1.22, coming in well ahead of analysts’ consensus estimate of $1.01.

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“We clearly have a lot of momentum as we exit Q1,” said PayPal CEO Dan Schulman in the company’s first-quarter earnings call. Tailwinds driving PayPal’s business — growth in e-commerce spending and the increasing availability of digital payment experiences — remain powerful, management added.

A tough quarter to predict

Analysts, on average, expect PayPal to grow second-quarter revenue 19% year over year to $6.26 billion. The consensus for the digital payments specialist’s non-GAAP earnings per share is $1.12, up from $1.07 in the year-ago quarter. 

While these growth trajectories are about in line with management’s guidance, PayPal’s incredible first-quarter momentum suggests these forecasts may be conservative. However, these are unprecedented times. It’s difficult to predict how a reopening U.S. economy during Q2 might have impacted e-commerce spending. Still, PayPal has a history of beating expectations — and the odds appear to be stacked in the tech company’s favor going into the company’s quarterly update this month.

Keep an eye on Venmo

One area, in particular, worth keeping an eye on when PayPal announces its quarterly results is its peer-to-peer payment app Venmo. The fast-growing app has morphed into a major catalyst for PayPal, accounting for $51 billion of the company’s $285 billion in first-quarter TPV. Further, this TPV grew sharply, rising 63% year over year. 

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Adding fuel to the fire, the company launched the ability for users to buy, sell, and hold cryptocurrencies in April. This was likely a significant driver for the app during the quarter.

Investors can tune in to PayPal’s second-quarter report after market close on Wednesday, July 28. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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