PayPal Showed It's Getting Back On Track

Last week, PayPal Holdings Inc PYPL issued its third quarter results that showed its turnaround efforts are on track. PayPal also announced it finally filled its CFO vacancy with Jamie Miller, a former CFO at EY. With the payment industry getting crowded with Apple Inc AAPL and Block Inc SQ, among others, PayPal stopped being the industry’s darling. Although it still hasn’t restored its glory, it showed solid fundamentals and its new CEO, Alex Chriss, told investors what they wanted to hear as shares were up 4.5% to $53.95 in after-hours trading.

PayPal Topped Estimates With Third Quarter Results

PayPal reported that adjusted earnings rose 20% YoY to $1.30 per share, comfortably exceeding FactSet’s estimate of $1.23 per share as revenue expanded 8% YoY to $7.4 billion, which was in line with expectations.

On a currency-adjusted basis, total payment volume expanded 13% to $387.8 billion but total active accounts contracted by four million to 428 million.

PayPal also raised its full year guidance.

PayPal rose its prior outlook as it guided for 2023 GAAP earnings of $3.75 per share, topping the consensus estimateof $3.57, while on a non-GAAP basis, earnings are expected to rise 21% to $4.98 per share, slightly toppingforecasts. Previously, it guided for full-year GAAP earnings of $3.49 and non-GAAP of $4.95.

PayPal Felt The Pain From The Rise Of Apple Pay

The latest reported quarter was crucial for the once digital payment leader that is facing an increasingly intense competition and macroeconomic challenges. Although it used to be a darling of the payments space, PayPal’s fortunes changed dramatically over the last two years. With Apple getting deeper into the payments space, PayPal got threatened. The rise of Apple Pay has certainly cast a shadow over PayPal’s growth. But even though Apple has deep pockets and innovative technology, a study from August from service Merchant Machine, showed that Apple Pay it is still behind Visa Inc V, MasterCard Incorporated MA, PayPal and American Express Company AXP, but the research is based on the number of transactions as opposed to total dollar values. Moreover, where Apple Pay is reportedly the fifth most popular payment method in the world, Amazon.com Inc AMZN is further behind it in sixth place.

Meanwhile, Visa Reported Its Revenue Rose 

At the end of October, Visa Inc V topped analyst predictions as consumer spending stayed strong. Visa reported a net income rose 19% YoY to $4.7 billion, or $2.27 per share. Visa posted a net revenue of $8.6 billion, topping Visible Alpha’s estimate of $8.5 billion.

Mastercard Expects Weaker Revenue Growth

Due to fears of economic slowdown, Mastercard guided for a weaker-than-expected net revenue growth for the undergoing, fourth, quarter. Despite a disappointing quarter as growth modestly decelerated but still stayed healthy, Mastercard CEO Michael Miebach emphasized on strong points of the third quarter, claiming that with the company’s well-diversified business model, Mastercard is set to capitalize on substantial opportunities in payments and services, despite a challenging macroeconomic and geopolitical climate. Mastercard reported its third quarter net revenue grew 14% YoY to $6.5 billion and due to resilient spending, Mastercard earned a net income of $3.2 billion, posting an adjusted profit of $3.39 per share, topping estimates of $3.21 per share.

The latest results from the digital payments space shows consumer spending remained resilient in light of recent challenges but this does not have to continue being the case as fears of a looming recession are still in the air. But PayPal remains focused on growing a high-quality customer base and profitable revenue, with the latest results suggesting it is getting back on track.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.