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PayPal earnings preview: Gains from lockdown spending

PayPal chief executive Dan Schulman

PayPal Holdings (PYPL) will report second-quarter results on Wednesday and optimism is high among investors after strong indications for improved performance.

Analysts expect PayPal’s robust product portfolio, which includes One Touch, Xoom and Venmo, and higher customer numbers to be reflected on the firm’s bottom line.  The second quarter coincided with the height of the coronavirus pandemic and subsequent lockdown, which caused customers to shift toward contactless payments. As a result, PayPal saw its payments volume accelerate in the to-be-reported quarter.

The company’s net new active accounts during the second quarter are also likely to show growth.

The second quarter is expected to see PayPal’s year-over-year revenues lift by 13% at current spot rate and 15% at foreign exchange-neutral basis. The Zacks consensus estimate for revenues is pegged at $4.95bn , up 14.9% from a year ago.

PayPal, led by chief executive Dan Schulman (pictured), anticipates non-GAAP earnings to improve in the range of 15-20%. The Zacks consensus estimate for earnings stands at 84 cents per share, suggesting a decline of 2.3% from the year-ago reported figure.

PayPal Stock

PayPal has been able to capitalize on the momentum of its innovative and advanced products and services.  Rising in-store digital payments are expected to have benefited the company’s peer-to-peer payments volume in the quarter to be reported.

Its investment in the development of a technology platform for digital payments contributed to the year-to-date, gain of 63.8% of PayPal’s stock, which currently trades at $172.56.

Increasing e-commerce spending due to the lockdown will have likely bolstered the company’s branded payment experience in the second quarter as well. Another revenue channel comes in the form of more and more stock brokers accepting PayPal as a payment method, which opens the door to new traders to enter the market and profit off it.

A positive earnings per share of +3.96% and strong performance in three of the trailing four quarters put PayPal on the radar of analysts and investors as one of the less risky stocks to invest in.

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Galina Mikova

Galina is a Hubspot-certified Technical Writer with over 10 years of experience in working with Fortune 500, private investment, banking, FOREX and niche tech companies as well as crypto and blockchain startups. She has a solid background in FinTech and blockchain technology.