PayPal Raises Annual Outlook, Expands Q1 Margins Amid Competitive Pressure from Apple

PayPal Holdings Inc PYPL reported fiscal first-quarter revenue growth of 9% year-over-year to $7.7 billion, beating the consensus estimate of $7.5 billion. 

The company reported quarterly adjusted EPS of $1.08 per share, missing analyst estimates of $1.22.

Total payment volumes increased 14% year-over-year to $403.9 billion in the quarter. Payment transactions were up 11% in the quarter, and payment transactions per active account increased 13% on a trailing 12-month basis. Total active accounts decreased by 1% to 427 million.

The operating margin expanded 84 basis points to 18.2%, and the adjusted operating income increased 15% year over year to $1.4 billion.

Operating cash flow came in at $1.9 billion, and free cash flow came in at $1.8 billion. PayPal held $17.7 billion in cash and equivalents as of March 31, 2024.

“2024 remains a transition year and we are focused on execution – driving our key strategic initiatives, realizing cost savings, and reinvesting appropriately to position the company for consistent, high-quality profitable growth in the future.” Alex Chriss, President and CEO, said.

Outlook: PayPal expects second-quarter revenues to increase by 6.5%—7% foreign exchange neutral or revenue of $7.761 billion—$7.797 billion versus the consensus of $7.797 billion. It expects adjusted EPS to grow in the low double-digit percentage compared to EPS of $0.87 in the prior year’s period and consensus of $1.21.

PayPal expects full-year 2024 adjusted EPS to increase by a mid to high single-digit percentage compared to $3.83 Y/Y (prior expectations of in line with FY23 adjusted EPS of $5.10. Current analyst estimates are calling for an EPS of $5.08 per share.

Consumer spending remains robust despite ongoing economic concerns impacting the payments sector. While lower-income groups have reduced discretionary spending, most Americans continue to engage in online shopping, dining out, and traveling, CNBC reports.

PayPal’s low-margin business offerings have seen significant growth, whereas its branded products have experienced slower growth due to heightened competition from rivals like Apple Inc AAPL.

Earlier this year, PayPal announced it would eliminate approximately 2,500 jobs, representing 9% of its global workforce.

PayPal Holdings stock lost 11% in the last 12 months. Investors can gain exposure to the stock via Amplify ETF Trust Amplify Mobile Payments ETF IPAY and Global X FinTech ETF FINX.

Price Action: PYPL shares traded higher by 5.81% at $70.90 at the last check Tuesday.

Photo courtesy of PayPal.