PayPal Beats in Q3 Earnings But Holds Back on Guidance Amid Coronavirus

PayPal reported its third quarter financial results this week revealing a beat on earnings and revenue but failed to provide an outlook ahead.

The global payments company said earnings rose 41% to an adjusted $1.07 per share. Revenue climbed 25% to $5.46 billion, including the acquisition of Honey.

Analysts expected PayPal earnings of 94 cents a share on revenue of $5.43 billion. A year earlier, PayPal earned 61 cents a share on sales of $4.38 billion.

Total payment volume rose 38% to $247 billion amid the coronavirus lockdowns. Analysts had projected TPV of $232.2 billion in the three months ended Sept. 30.

The company reported its strongest growth in total payment and volume and revenue in its history. Total payment volume (TPV) was $247 billion, growing 38%, and 36% on an FX-neutral basis (FXN), revenue of $5.46 billion, growing 25% on a spot and FXN basis.

GAAP EPS of $0.86 was a growth of 121% and non-GAAP EPS of $1.07 was a growth of 41%.
The company had 15.2 million net new active accounts added and ended the quarter with 361 million active accounts. PayPal did not provide preliminary fiscal 2021 guidance amid the coronavirus.

Ahead of the earnings release, Morgan Stanley raised their stock price forecast on shares to $229 from $210, assigning an “Overweight” rating. The firm had predicted third-quarter revenue growth of 25.3% with adjusted EPS of $0.94.

“We raise our 3Q20 revenue growth forecast to 25.3% from 23.0%, as we contemplate higher TPV growth of 31%. We lower our 3Q adjusted EPS forecast to $0.94 from $0.95 as we assume a slightly lower margin, given reinvestments. For CY20, we look for net revenues of $21,354M (up from $21,274M) due to strength in core PayPal and lower our adjusted EPS estimate to $3.70 from $3.71. In CY21, our total revenues forecast rise to $24,796M (vs. prior MSe of $23,357M) and our adjusted EPS estimate rises by $0.28 to $4.46,” said James Faucette, equity analyst at Morgan Stanley.

“In CY22, we look for a more normalized TPV and revenue growth rate of 23% (ex-FX) and 18%, respectively. We forecast ~75bps of adjusted operating income margin expansion. This results in 22% YoY adj. EPS growth to $5.46. We raise our PT to $229 (from $210), derived from a 42x (NC) multiple on our new CY22 adj. EPS forecast of $5.46,”

Citigroup boosted their target price on shares of PayPal to $218 from $186 and gave the company a “buy” rating in July while Wells Fargo & Company boosted their target price to $215 from $200 and gave the company an “overweight” rating. Jefferies Financial Group also raised their target price to $230 from $210 and gave the company a “buy” rating.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.