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PayPal Q1 preview: What is Wall Street predicting?

The overall market outlook for PayPal’s financials and stock price remains optimistic, ahead of its first-quarter results announcement.

Source: Bloomberg
  • PayPal Holdings Inc (Nasdaq: PYPL) share price slumps to US$250.16 per share
  • Ebitda for 1Q could jump 49%, according to Wall Street’s forecasts on average
  • The stock price might hit US$314.19 over the next year, analysts targeted
  • Buy and sell PayPayl shares with an IG account

PayPal stock price: Will it rebound?

Fintech giant PayPal’s stock tumbled another 3.5% day-on-day to finish Tuesday (04 May 2021) at US$250.16, on a volume of about 9.2 million shares.

Since the market’s close last Wednesday (28 April 2021), PYPL shares have lost 7.7%, ahead of the online payments firm’s first-quarter earnings announcement.

In the first half of April, the counter enjoyed a 13% rally from US$242.84 at end-March to US$275.43 on 13 April 2021.

Year-to-date, the stock is up 6.8%, after a volatile showing in the past several months.

Bloomberg data showed analysts staying largely bullish on PayPal shares, with 46 recommending ‘buy’, five saying to ‘hold’, and only one ‘sell’ call as of Tuesday. Their average 12-month target price was US$314.19 per share.

What are analysts expecting for PayPal’s earnings?

On Wednesday (05 May 2021) after the market closes, PayPal will report its results for the first quarter of 2021.

Wall Street consensus is for earnings per share to surge 53% year-on-year to US$1.01 for the quarter, according to estimates compiled by Bloomberg.

Revenue could amount to US$5.88 billion, up 27% from the year-ago period, while Ebitda will likely jump 49% to US$1.62 billion, analysts forecast.

Bloomberg Intelligence’s (BI) research team noted that the consensus estimates for PayPal’s revenue growth were slightly below the company’s guidance and ‘leaves room for upside’.

The outlook for the whole of this year could move higher, given what PayPal CEO Daniel Schulman has described as strong traction in the new cryptocurrency payment business, BI added.

The forecast for a 39% increase in payment volumes for 1Q 2021 is in line with the rate in 4Q 2020, and ‘should reflect easier year-on-year comparisons and the impact of stimulus cheques on user balances and transactions’, BI analysts wrote.

They also anticipate ‘incremental growth’ from better-than-expected crypto-trading fees, a bigger share of merchant checkout helped by Buy Now Pay Later, and new in-store revenue with more merchants accepting QR-code payments.

What are the potential downsides?

Valens Research wrote that PayPal has historically ‘seen robust but fading profitability’.

The management may also lack confidence in their ability to reimagine the next generation of the facial system, build on the strong business momentum, and improve value-added service revenue, Valens analysts added.

In addition, there are concerns about the declines in the travel and events verticals, and their impact on US revenue growth, according to Valens.

Risks to analyst consensus include an increase in expenses above the 19% estimate amid aggressive new-product plans, BI said. There might also be a faster roll-off of eBay volume, which is expected to cost 400 basis points of growth this year.

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