PayPal Earnings Preview Q3 2015

  • PayPal earnings for Q3 2015 are expected to be announced next week (October 28).
  • The focus will be on mobile payments growth, eBay transactions and Xoom deal closure.
  • Market expects growth to continue and waits for updates about new eCommerce partnerships.

Electronic payments company, Paypal Holdings (NASDAQ:PYPL) is expected to report is Q3 2015 earnings results next week (October 28) for the first time as an independent company after the split from eBay (NASDAQ:EBAY). Since the split took place on July, both stocks of EBAY and PYPL declined – EBAY by 15% and PYPL by 7% in light of the intensified competition in eCommerce and payment processing market coupled with the global equity market weakness.

In the previous earnings announcement last quarter (still under eBay) PayPal reported record revenues of $2.26B reflecting a 16% YoY growth, mainly driven by a 15% growth in total payment volume (‘TPV’) and 24% increase in merchants services volume. PayPal increased TPV continuously and reached a record figure of $65.9B in Q2 2015 with new opportunities opened after the eBay split. These new opportunities include partnering with other eCommerce sites that compete with eBay, like Amazon, penetrate the Chinese market and expand its penetration into mobile payments market, now that SMB merchants don’t consider PayPal as part of their competition.

In its Q2 2015 earnings PayPal provided a full year revenues outlook of $9.2B which reflects a 16.5% (mid-point) growth YoY and an EPS guidance of $1.25 which is on par with analysts’ expectations. Analysts are very optimistic also about PayPal’s performance and current mean price target is $42.33 which reflects an impressive 25% upside for the company’s stock. The high expectations from PayPal can be a negative trigger for the PayPal stock, as seen in other growth companies that delivered less than perfect results and plunged as a result.

Xoom and Braintree as growth drivers

One of the focus areas investors will be watching for is the Xoom deal closure, that is expected any time now. PayPal offered to acquire Xoom for $890M and the company received their board approval for the move, however, some regulatory setbacks prevented them from officially closing the deal. PayPal offer to acquire Xoom to strengthen its international offering is in addition to Braintree that was acquired by PayPal two years ago. Last month, Braintree released interim 2015 figures and unveiled that the company processed more than $50B transactions since the beginning of the year in mobile payments worldwide, significantly impacting PayPal’s performance in that niche.

Braintree’s positioning in the mobile processing market should help PayPal to fight back against the rising rival services from Apple (NASDAQ:AAPL), Samsung Electronics (OTC:SSNLF) and Alphabet Inc-C (NASDAQ:GOOG). Braintree’s offering in that market should assist PayPal to monetize the growth of mobile payments and use that to grow company’s revenues further and support analysts’ expectations in light of the global drop in eCommerce volume.

eBay is still a relevant revenue stream

Even though PayPal spun-off from eBay it doesn’t mean that the two companies stopped working together and PayPal is still processing transactions on eBay. eBay reported its Q3 2015 this week with higher than expected results and a 6% GMV growth YoY (ex-forex) mainly driven by U.S. transactions. As long as eBay doesn’t introduce other rival payment processing services PayPal is still significantly benefiting from a GMV increase in eBay. Now that PayPal is independent, it strives to increase its revenues from eBay while penetrating rival eCommerce platforms and benefiting from them both.

While many market participants were delighted with the split that could enable PayPal to potentially unlock value – this is a long-term process. In the short term PayPal generates significant portion of its transaction revenues from eBay and that shouldn’t change for now. A positive progress in that front could serve as a short term catalyst for the stock price. Any announcement of a new partnership with a leading eCommerce platform will send the stock sharply high, however the likelihood of that is low for now.

These are the comparable figures to watch in this earnings:

Q3’15 Consensus Q3’14
Revenue $2.28B $1.95B
EPS $0.29 N/A

Source: Yahoo Finance, Thomson Reuters

Comment: Q3’15 guidance is not available as PayPal and eBay provided only annual guidance in Q2 2015 earnings release.


Payment processing company, PayPal is expected to report its first earnings as an independent company next week ,coming on the heels of eBay’s higher than expected Q3 results. Company is expected to present a substantial growth in revenues and TPV driven by Braintree, mobile payments and eBay revenues. Any announcement on a new ecommerce partnership deal will trigger a surge in stock price, while any additional setback in the Xoom deal might drive the stock price down. The expectations are very high following eBay’s beat, and I’m optimistic about PayPal earnings.

Show Full Article
5 2
Is this article helpful ?    

Author's Disclosures & Disclaimers:
  • I am not an investment advisor, and my opinion should not be treated as investment advice.
  • I am not being compensated for this post (except possibly by Amigobulls).
  • I do not have any business relationship with the companies mentioned in this post.
  • The information provided in this article is for informational purposes only and should not be regarded as investment advice or a recommendation regarding any particular security or course of action. This information is the writer's opinion about the companies mentioned in the article. Investors should conduct their due diligence and consult with a registered financial adviser before making any investment decision. Lior Ronen and Finro are not registered financial advisers and shall not have any liability for any damages of any kind whatsoever relating to this material. By accepting this material, you acknowledge, understand and accept the foregoing.
Amigobulls Disclosures & Disclaimers:

This post has been submitted by an independent external contributor. This author may or may not hold any positions in the stocks discussed. Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. Amigobulls has not verified the author’s positions in the stocks discussed, and does not provide any guarantees in this regard. The author may be paid by Amigobulls for this contribution, under the paid contributors program. However, Amigobulls does not guarantee the authenticity or accuracy of the information provided by the author in this post.

The author may not be a qualified investment advisor. The opinions stated in the post should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions.

Amigobulls does not have any business relationship with any of the companies covered in this post. This post represents the views of the author/contributor and may not reflect the views of Amigobulls.

show more

Comments on this article and PYPL stock

Do share this awesome post