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PayPal Delivers Mixed Q3 Results; Issues Guidance

PayPal (PYPL) delivered mixed Q3 2021 results which management insists affirm the strength of a diversified platform and global reach. Earnings topped estimates, but revenue missed as the electronic payment company continued to roll out new consumer experiences amid a robust international expansion.

PayPal is a digital payments company that allows people to send and receive payments electronically. Its notable payment solutions include PayPal, PayPal Credit, and Venmo. (See Insiders’ Hot Stocks on TipRanks)

Mixed Q3 results

Revenue in Q3 landed at $6.18 billion, up 13% compared to the same quarter last year but below the consensus estimate of $6.23 billion. PayPal also posted a 4% year-over-year increase in EPS that landed at $1.11, exceeding consensus estimates of $1.07.

Total payment volume in the quarter was up 26% year-over-year to $310 billion as operating cash flow grew 15% year-over-year to $1.51 billion. Free cash flow landed at $1.29 billion, up 20% compared to the same quarter last year. PayPal had 416 million active accounts in the quarter.

Q4 Outlook

According to CEO Dan Schulman, Q3 results affirm solid growth on top of a record year. According to the executive, the strength of the two-sided platform and ubiquity in core markets means the company is well-positioned to grow at scale.

For the fourth quarter, management expects revenue to range between $6.85 billion and $6.95 billion, representing 12% to 14% year-over-year growth. Non-GAAP diluted earnings per share are expected to grow by 4% to $1.12.

Business Highlights

During the quarter, PayPal inked a strategic partnership with Amazon. Consequently, customers will be able to make purchases on Amazon.com and the mobile shopping app and checkout using Venmo accounts.

In addition, PayPal acquired buy now pay later solutions Paidy for $2.7 billion, enhancing its capabilities and relevance in Japan. It also expanded its cryptocurrency product offering by enabling the ability to buy, hold, and sell cryptocurrencies in the U.K.

Stock Ratings

Rosenblatt Securities analyst Sean Horgan reiterated a Buy rating on the stock with a $322 price target implying 40.4% upside potential to current levels. The analyst expects the stock to trade slightly lower as the company continues to execute in line with expectations.

Consensus among analysts is a Strong Buy based on 17 Buys, two Holds, and one Sell. The average PayPal price target of $312.18 implies 36.1% upside potential to current levels.

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