Key Observations Ahead Of PayPal's Second-Quarter Results: Preview

PayPal Holdings, Inc PYPL will report its second-quarter earnings results on August 2, 2023.

Analysts expect the company to post quarterly earnings at $1.06 per share, up from year-ago earnings of $0.93. The revenue consensus is $6.61 billion vs. a year ago revenue of $6.81 billion.

The stock faces the brunt of high inflation and weak employment numbers, curtailing consumer spending. 

Fitch's downgrading of the U.S. credit rating, citing fiscal deterioration over the next three years and repeated down-the-wire debt ceiling negotiations, could further weigh on the stock.

On August 1, Morgan Stanley analyst James Faucette reiterated an Overweight rating on PayPal with a price target of $133.

Faucette sought clarity over investors' operational and organizational concerns for PYPL from the 2Q23 earnings call. However, the time for demonstrable proof will likely stretch into 2024 (outside of naming a new CEO, likely to happen before the end of FY23). 

Ultimately, he hopes that the realization of re-rating will depend on investor views shifting from largely pessimistic on the critical operational elements to optimistic. He expects the investors to watch the margins closely. 

On July 25, BTIG analyst Lance Jessurun maintained PayPal with a Buy and raised the price target from $85 to $90. 

The re-rating reflected a moderation in the inflation and employment numbers, followed by more clarity from the management regarding the broader macro environment.

On July 6, Piper Sandler analyst Kevin Barker maintained a Neutral rating and lowered the price target from $83 to $80, citing macro headwinds further fueled by the resumption of student debt payments.

Also in June, PYPL hosted a management meeting featuring presentations from the company's leadership team, including CEO Dan Schulman. 

Analysts hailed the effort for showcasing the company's monetization initiatives for the company's significant scale, focus on share gains (branded), and margin-enhancing initiatives. 

Last week, PayPal announced Microsoft Corp's MSFT integration of PayPal's Pay Later solution in the U.S., U.K., Australia, Germany, France, Spain, and Italy. In addition, customers in the U.S. will soon have the option to pay with Venmo in the Microsoft Store. These new integrations offer customers more flexible ways to pay and boost customer loyalty.

Price Action: PYPL shares traded lower by 3.61% at $72.80 on the last check Wednesday.