PayPal Holdings Inc (NASDAQ: PYPL) reported better-than-anticipated FY 2022 third-quarter earnings and revenues. However, the payment processing service provider issued a lower-than-expected FY 2022 revenue outlook. Also, PayPal’s fourth-quarter revenue outlook missed the Wall Street estimate. Furthermore, the company also warned about a likely negative impact on the business due to the global economic slowdown. This took a toll on the share price, which dropped 1.79%, or $1.370, to close at $75.18.
San Jose, California-based PayPal reported third-quarter revenues of $6.85 billion, an increase of 10.80% from $6.18 billion in the prior-year period.
For the recent quarter, which ended September 30, 2022, the company posted a net income of $1.33 billion, or $1.15 per share, compared with $1.09 billion, or $0.92 per share, in the quarter that ended September 30, 2021.
Excluding net (gains) losses on strategic investments and the tax effect of non-GAAP adjustments, among others, PayPal’s 3Q 2022 non-GAAP net income was $1.25 billion, or $1.08 per share, down from $1.319 billion, or $1.11 per share, in 3Q 2021.
Analysts surveyed by Refinitiv had anticipated the company to report adjusted earnings of $0.96 per share on revenues of $6.82 billion.
Commenting on the quarterly results, Gabrielle Rabinovitch, Acting CFO and SVP, Investor Relations and Treasurer, stated “Our strong third quarter results reflect both the diversification of our business and our ongoing focus on operating discipline.”
Segment wise,
- Transaction revenues surged 11% y-o-y to $6.234 billion.
- Revenues from value-added services were $612 million, an increase of 6% from last year.
PayPal’s aggregate payment volume increased to $337 billion in Q3 2022 from $310 billion a year ago. Likewise, Venmo recorded a transaction volume of $63.60 billion.
On a year-over-year basis, transactions per active account increased by 13% to 50.10%. During the third quarter, PayPal added 2.90 million fresh active accounts, taking the total number of active accounts to 432 million. The figure missed FactSet’s estimate of 432.90 million. The company anticipates adding eight to 10 million fresh active users in FY 2022.
Looking ahead, PayPal expects Q4 revenues of $7.375 billion and earnings of between $1.18 and $1.20 per share. Refinitiv analysts forecast the company to post revenues of $7.74 billion.
For FY 2022, the company now anticipates revenues of roughly $27.50 billion, versus analysts’ forecasts of $27.81 billion. PayPal had earlier projected revenues of $27.85 billion.
PayPal also upwardly revised its FY 2022 GAAP income to a range of between $2.11 and $2.13 per share, from a prior range of $1.52 to $1.62 per share. The company also currently projects adjusted earnings of between $4.07 and $4.09 per share, compared with an earlier outlook in the range of $3.87 to $3.97 per share. Wall Street analysts anticipate the company to report adjusted earnings of $3.93 per share.
The company is also broadening its scope of business by participating in Apple’s “Tap to Pay” program, which enables users to transform their smartphones into payment-acceptance devices without the need for additional hardware. Furthermore, PayPal and Venmo cards (debit and credit) are planned to be included in Apple Wallet next year. PayPal also intends to include Apple Pay as a mode of payment in its yet-to-be-branded checkout system.
Concerning 2023, the company’s management said that it aims to achieve adjusted earnings growth of 15% and lift the operating margin by a minimum of 100 basis points.
The quarterly earnings beat, slightly lower Q4 revenue view, and mixed FY 2022 outlook are expected to keep the share price of PayPal range-bound in the short term.
The historical price chart indicates that the stock has formed a double bottom at 75. The next resistance is anticipated only near 115. Additionally, the stochastic indicator is out of the bearish zone and rising. Therefore, we anticipate the stock price of PayPal to begin an uptrend in the days ahead.
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