San Jose, CA-based PayPal (PYPL - Free Report) , which is one of the largest online payment solution providers, came out with quarterly earnings of $1.19 per share, beating the Zacks Consensus Estimate of 96 cents per share. The reported figure compares with earnings of $1.16 per share a year ago.
The company, which belongs to the Zacks Internet - Software industry, posted revenues of $7.89 billion in the second quarter (up 9% year over year on a currency-neutral basis), surpassing the Zacks Consensus Estimate by 1.04%.
PayPal also raised its forecast for full-year 2024 adjusted profit for the second time this year, anticipating decent consumer spending in the back-to-school and upcoming holiday shopping seasons while cutting costs to boost margins. PYPL shares jumped 8.6% on Jul 30, 2024, reflecting the upbeat results.
Inside the Headline
Despite persistent concerns over higher interest rates impacting consumer spending, PayPal has reported resilient growth in transaction volumes.Total payment volumes increased 11% year over year in the second quarter. The company's ability to maintain steady consumer activity comes at a time when other payment firms talk about pressures on business from lower-income groups.
Under the leadership of CEO Alex Chriss, PayPal has pursued aggressive cost-cutting measures to enhance operating margins. This includes a significant restructuring effort that involved a 9% reduction in its global workforce, totaling approximately 2,500 job cuts announced earlier this year. Operating margins grew 231 basis points year over year to 18.5%.
PayPal observed 6% year-over-year growth in total payments volumes in its branded checkout segment in the second quarter. Key contributors to profitability included branded checkout, Braintree and Venmo, which collectively led to an 8% increase in transaction margin dollars to $3.61 billion.
Revised Profit Expectations for 2024
PayPal has boosted its profit growth forecast for 2024 to a "low to mid-teens percentage" increase, from the earlier mentioned "mid to-high single-digit" growth. This is a key positive for the company.
Time to Invest in PayPal?
The PYPL stock has a Zacks Rank #2 (Buy) at present. The stock comes from the top-ranked (top 41%) Zacks Internet - Software Industry and the top-ranked (top 44%) Zacks Computer and Technology sector. The stock also has an upbeat VGM score of “A.”
Should You Play PayPal Via ETF Method?
Despite strong performance metrics, PayPal's third-quarter year-over-year revenue growth outlook of a "mid-single-digit percentage" missed Wall Street expectations of 7.5%, according to LSEG data, as quoted on CNBC. Competition is also rife in the digital payment business. However, the company is focused on sustaining growth amid evolving market conditions.
ETFs in Focus
The PYPL stock has a 7.6% exposure toGrayscale Future of Finance ETF (GFOF - Free Report) , a 6.95% weight in Global X FinTech ETF (FINX - Free Report) and a 6.48% exposure to Amplify Mobile Payments ETF (IPAY - Free Report) . The ETF approach is better when you want to minimize company-specific concentration risks.
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