What Morgan Stanley Expects From PayPal's Q2 Print

PayPal, Inc. PYPL is set to report second-quarter earnings after the amarket close Wednesday.

In anticipation of this earnings call, analysts at Morgan Stanley have provided insight into the company’s market positioning. Consensus estimates project second-quarter EPS at $1.13 and revenue at $6.27 billion.

The Morgan Stanley View On PayPal 

PayPal has held market leadership in a robust e-commerce environment and is continuing to roll out new features for increased engagement, said analyst James Faucette in a Tuesday note.

The analyst maintained an Overweight rating on PayPal with a $337 price target.

Faucette forecast second-quarter EPS in-line with consensus at $1.13 and revenue just below expectations at $6.26 billion. He also expects operating margins to come in at 26.3%, slightly ahead of consensus estimates of 25.9%.

Many investors are leaning towards an earnings beat, the analyst said.

Unless PayPal blows expectations out of the water, significant upward price movement following earnings is unlikely, he said. 

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PayPal's Secular Tailwinds

The increased usage of e-commerce for shopping needs should continue driving users and transactions to PayPal’s platform, said Faucette.

Because PayPal’s digital wallet is a preferred choice for merchants and consumers, PayPal will likely outperform broader e-commerce total payment volume growth, excluding Amazon, Inc. (NASDAQ: AMZN), said the analyst.

PayPal additionally benefits from its legacy status in the online payment processing market, as it is accepted by 79% of the top 500 U.S. retailers, said Faucette.

E-Commerce Trends And PayPal 

E-commerce continues to grow, yet at a slower pace than before, said the analyst. Census Bureau data shows an 11.5% increase in non-store retailer volume, compared to a 30.6% increase in the first quarter, he said. 

Despite growth deceleration over the last quarter, e-commerce growth is still robust, as evidenced by Visa’s 62% growth in card-not-present transactions from April and May of 2019, Faucette said.

E-commerce is also helping expand cross-border spending, a market that accounts for 17% of PayPal’s TPV, said the analyst.

PYPL Price Action: Paypal was up 0.28% at $301.33 at last check Wednesday. 

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Photo: courtesy of PayPal.