PayPal Holdings (PYPL) reported mixed results in the third quarter. The payments processing company’s adjusted earnings increased by 22% year-over-year to $1.20 per share, above consensus estimates of $1.07 per share.
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In terms of revenue, the company’s figures increased 6% year-over-year to $7.8 billion, compared to analysts’ expectations of $7.88 billion.
PYPL’s Key Metrics Are on the Rise
As for digital payment performance, PayPal’s broader metrics exhibited solid results in the third quarter. Total payment volume, a key indicator of digital payment activity in the economy, grew 9% year-over-year to $422.6 billion, narrowly surpassing analysts’ average expectation of $422.5 billion.
In addition, PayPal’s active accounts reached 432 million, reflecting a 0.9% increase year-over-year and exceeding consensus estimates of 430.5 million.
Finally, the company’s transaction margin, a measure of profitability in its core operations, improved to 46.6% from 45.4% in the third quarter. In dollar terms, PYPL’s transaction margin grew 8% year-over-year to $3.7 billion. This rise in transaction margin has benefitted from “higher interest income, better-branded checkout,” and improved performance of its mobile payment app, Venmo.
PYPL Raises Outlook
Looking ahead, management now expects Q4 revenues to grow in the low single digits, while adjusted earnings are likely to decline in the low to mid-single digits year-over-year. For FY24, PYPL now estimates its adjusted earnings per share to increase in the high teens year-over-year, compared to its prior forecast of low to mid-teens growth.
Is PayPal a Buy, Sell, or Hold?
Analysts remain cautiously optimistic about PYPL stock, holding a Moderate Buy consensus rating based on 16 Buys and 16 Holds. Over the past year, PYPL has increased by more than 60%, and the average PYPL price target of $80.25 implies a downside potential of 4% from current levels. These analyst ratings are likely to change following PYPL’s results today.
