11/24/2023 0 Comments PAYPAL TAGR![]() PayPal's name recognition will help it grow its active accounts and the number of merchants who carry it as a form of payment. The company's peer-to-peer payment platform, Venmo, has become a verb. PayPal built a powerful brand name synonymous with what it does. And that's not the only source of PayPal's competitive advantage. The more customers join PayPal's digital payment ecosystem, the more it will become attractive to merchants, and vice versa. The company benefits from the network effect. PayPal ended the second quarter with 431 million active accounts, an increase of 2 million year over year. That's pretty impressive, and there is still plenty of upside left for the company. Notably, PayPal's TPV already crossed the $1 trillion mark and stood at $1.36 billion as of the end of 2022. PayPal reports that between 20, its active account, total payment volume (TPV), and revenue grew at compound annual growth rates of 14%, 24%, and 16%, respectively. But zooming out can help bring a bit of perspective. All these issues explain why PayPal hasn't performed very well on the stock market. The company's user and revenue growth decelerated compared to their 2020 levels, and it has also been on the wrong side of currency exchange rate dynamics that have taken a bite out of its top-line growth metrics. The average PayPal stock price target is $88.56, implying 37.8% upside potential.PayPal struggled a bit over the past year and a half as its pandemic-related boom ended. On TipRanks, PYPL is a Moderate Buy based on 20 Buys and 12 Hold ratings assigned by analysts in the past three months. Is PYPL Stock a Buy, According to Analysts? Again, I don't see anything terrible or unfixable happening here. That's higher than the 429 million active accounts that PayPal had in the year-earlier quarter, but it's also lower than the 433 million active accounts the company reported in Q1 2023. It's also possible that investors are concerned about PayPal's active accounts, which totaled 431 million in Q2 2023. To me, that doesn't sound like a horrendous drop in PayPal's profit margins, but evidently, the market is choosing to see the glass as half-empty. ![]() However, this result represents a decline from 22.7% in 2023's first quarter. As it turned out, PayPal reported a non-GAAP operating margin of 21.4% for the second quarter, up 228 basis points year-over-year. Perhaps, that's because PayPal's margins aren't really all that bad. At the same time, Jessurun hasn't changed his Buy rating and his $90 price target on PYPL stock. Jessurun, the BTIG analyst I mentioned earlier, acknowledged that PayPal's margins fell short of Wall Street's expectations. ![]() PayPal has had to deal with this issue just like many other businesses, but somehow, the market isn't willing to forgive PayPal for its declining margins. Profit margins have been a major concern of businesses generally, especially during the second quarter, when inflation was still elevated and reduced companies' profits. Here's the billion-dollar question: If PayPal delivered numerous positive data points in Q2, why did PYPL stock drop on high volume? The answer, for the most part, has to do with PayPal's declining margins. With all of those positive data points in mind, we now have to figure out why traders would choose to sell their PayPal shares. In addition, the company's total payment volume of $376.5 billion exceeded Wall Street's consensus estimate of $368.87 billion.Īs far as operating highlights go, PayPal increased its payment transactions by 10% to 6.1 billion and boosted its total payment volume (TPV) by 11% to the aforementioned $376.5 billion. Furthermore, PayPal generated revenue of $7.3 billion, up 7% year-over-year and topping analysts' call for $7.27 billion. Does this mean that PayPal posted a slew of disappointing data points? Not at all - in actuality, the company beat analysts' earnings expectations and provided plenty of fodder for the bulls.įor one thing, PayPal reported non-GAAP EPS of $1.16, while analysts had called for $1.15 per share. PayPal stock fell by over 12% today, the day after the company released its second-quarter 2023 earnings results. PayPal Beats the Street, but the Stock Still Tanks Contrarian traders should consider whether the crowd is overreacting and whether now is the time to buy what others are selling. Now, all of a sudden, investors are overwhelmingly bearish about PayPal stock (though analysts might not be). However, the tide of sentiment can turn quickly in the financial markets. ![]()
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