PayPal Stocks Pull Back After Second Quarter Results: Blame eBay?

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Shares of Paypal Holdings Inc (NASDAQ: PYPL) are down 5% after the company reported second-quarter sales and earnings figures that disappointed the market.

PayPal announced adjusted EPS of $ 1.15, slightly beating analysts’ estimates of $ 1.12. Revenue for the quarter was $ 6.24 billion, missing the consensus forecast of $ 6.27 billion. Revenue increased 19% from a year ago.

Net income for the quarter fell 23% to $ 1.18 billion. PayPal said it added 11.4 million new net active accounts, bringing its total to 403 million.

Total payment volume in the quarter increased 40% to $ 311 billion. Venmo’s payment volume rose 58% to $ 58 billion.

Going forward, PayPal has forecast third-quarter EPS of $ 1.07 for revenue of between $ 6.15 billion and $ 6.25 billion. Both figures missed analysts’ estimates of $ 1.14 billion and $ 6.44 billion, respectively.

Related Link: 4 Alphabet Analysts Break Down Second Quarter Results: “Google Remains Our Best FANG 2021”

Long-term growth path: Credit Suisse analyst Timothy Chiodo said PayPal continues to generate impressive growth figures on a large scale and has several wild cards that could help in the future.

“The medium-term outlook places PayPal in a rare group of companies that can make up about 20% + of revenue at this level of scale,” Chiodo wrote in a note.

RBC Capital Markets analyst Daniel Perlin said PayPal has hit a slowdown, but its long-term bullish thesis remains intact.

“While PYPL’s underlying growth remains strong, the near-term outlook and headwinds associated with eBay’s shift to managed payments are putting pressure on Q3 / 21 and FY21 forecasts. “Perlin wrote.

Rosenblatt Securities analyst Sean Horgan said expectations of PayPal were coming to earth, but there was still huge potential for Venmo.

“Net / net, we expect shares to rise throughout the year as the company provides updates on its multitude of new deployments (3T Next Generation Digital Wallet refresh, early troubleshooting, messaging P2P bidirectional, etc.), ”Horgan wrote. .

Blame eBay: Raymond James analyst John Davis said PayPal’s accelerated sell-off of its eBay Inc (NASDAQ: EBAY) portfolio was the main reason for the forecast failure.

Simply put, PayPal is expected to continue to benefit from the age-old shift to e-commerce which is expected to result in revenue growth of around 20% CAGR, which, coupled with expanding margins and capital allocation (M&A + buybacks), is expected to result in a profit CAGR north of 20% over the next few years, ”Davis wrote.

Needham analyst Mayank Tandon said eBay’s transition had deteriorated second-quarter numbers and otherwise strong forecasts.

“While eBay’s transition dampens NT’s outlook, trends across the rest of the business remain strong as digital payments continue to rise,” Tandon wrote.

Buy The Dip: KeyBanc analyst Josh Beck said the temporary weakness in eBay-linked PayPal stocks creates a buying opportunity for investors.

“Positive elements such as 43% growth in merchant service POS, around 180% growth in Pay with Venmo and $ 1.5 billion in BNPL support our thesis as a premier payment platform; thus, we would be buyers on the withdrawal, ”Beck wrote.

Morgan Stanley analyst James Faucette said PayPal’s engagement and acceptance metrics are the most important metrics for investors to track.

“Engagement and expansion of acceptance are very positive indicators of future growth, and we see the deliberate pace of margin expansion as the right strategy given the high levels of investment,” wrote Faucette.

EBAY Ratings and Price Targets: Credit Suisse has an outperformance rating and a target of $ 315. RBC has a top performance rating and a target of $ 322. Rosenblatt has a buy rating and a goal of $ 352. Raymond James has an outperformance rating and a goal of $ 340. Needham has a maintenance rating. KeyBanc has an overweight rating and a target of $ 335. Morgan Stanley has an overweight rating and a target of $ 340.

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