PayPal’s earnings exceed expectations. Why his stock is down.

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A sign is displayed outside PayPal’s headquarters in San Jose, California. Justin Sullivan / Getty Images

PayPal stock fell after the payments company beat second-quarter profit guidance, but offered below-consensus guidance.

PayPal reported adjusted earnings of $ 1.15 per share, beating forecast of $ 1.13 on sales of $ 6.24 billion, missing analysts’ estimates of $ 6.27 billion. PayPal also said it would earn $ 1.07 per share in the third quarter, below estimates of $ 1.14, while sales forecasts of $ 6.15 billion to $ 6.25 billion were lower than expected. $ 6.43.

The third quarter outlook will guide the narrative, with guided earnings around 3.5% below Street’s estimates. and EPS ~ 6% below, writes Jefferies analyst Trevor Williams.

PayPal pointed to the impact of eBay’s transition to a managed payment system as a source of slower growth. POS growth was 40% with eBay, 48% without out, while sales increased 32% without eBay compared to 19% with.

Now absorbing more pressure from eBay than we expected, CFO John Rainey said on a call with analysts. He added that the company expected eBay to slow our revenue growth more than expected. The drag will rise to 8.5 percentage points of growth on third-quarter revenue, slashing $ 465 million and taking revenue to around $ 6.2 billion.

Mizuho Securities Dan Dolev urged investors to take a longer-term view. While it is true that the Covid honeymoon may be over, he wrote, referring to PayPal’s phenomenal growth in 2020, he highlighted several bright spots in the results report, including stronger engagement with PayPal’s core applications; and momentum in new initiatives like buy now pay later, which saw transaction volume growth of 49% quarterly.

He also points out that PayPals increased its forecast for total payment volume from 30% to 33% -35% in the third quarter, 10 points above pre-pandemic levels. This suggests that strong e-commerce trends and PYPL’s share gains are here to stay, he wrote in a note.

But expectations for the title can be hard to meet at this point, and there were signs of pressure that could escalate.

PayPal, for example, reported that it continues to see weakness in the usage rate charged to merchants, referring to the payments they make to PayPal for its services. The rate fell from 2.21% in the fourth quarter of 2020 to 2.11% in the first quarter and 2.01% in the second quarter. PayPal attributed the drop to lower eBay volumes and lower exchange fees, but this may also indicate that PayPal is facing more competitive pricing pressure.

Investors do not seem to be in a lenient mood. Shares of PayPal were down 4.8% to $ 286 in pre-market trading. Expect more analysts to step in on Thursday.

Write to Ben Levisohn at [email protected]

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