Financial technology major PayPal Holdings, Inc. (NASDAQ: PYPL) posted stronger-than-expected results for the second quarter ended June 30, 2022. Both revenue and earnings exceeded expectations. Following the upbeat results, shares of the company rocketed by 11.3% to close at $99.75 in extended trade.
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Rising Website Traffic Predicted the Strong Results
TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into PayPal’s performance this quarter.
According to the tool, the PayPal website recorded a 57.70% monthly rise in global visits in June, compared to the same period last year. Moreover, year-to-date, PayPal website traffic increased by 52.86%, compared to the previous year.
PayPal’s rising website traffic acted as a timely precursor to its strong results. The company’s heightened online activity reflects the strength of its digital platform.
Learn how Website Traffic can help you research your favorite stocks.
Q2 Earnings Snapshot
PayPal reported quarterly net revenues of $6.8 billion, which denotes a growth of 10% from the previous year’s quarter. Further, the figure topped the consensus estimate of $6.79 billion.
However, the company’s earnings per share (EPS) for the quarter declined by 19% from the year-ago quarter to $0.93. Yet, it managed to surpass the consensus estimate of an EPS of $0.87.
A Look at the Operating Metrics
PayPal recorded year-over-year growth of 9% to $339.8 billion in total payments volume. Notably, the company’s active accounts and the number of payment transactions increased by 6.5% and 16.4% from the previous year, respectively.
However, the transaction margin declined to 48.7% from 56.8% in the previous year. Also, the operating margin declined to 19.1% from 26.5% in the prior year.
Meanwhile, the free cash flow balance improved to $1.3 billion from $1.1 billion in the previous year. In terms of buyback for the quarter, the company repurchased about 8 million shares for about $750 million.
Expectations for Q3 and 2022
In terms of revenue, the company expects to clock net revenues of $6.8 billion in the third quarter and $27.85 billion in the Fiscal Year 2022.
The company expects EPS to be in the range of $0.94-$0.96 in the third quarter. For the Fiscal Year 2022, PayPal expects to report EPS between $3.87 and $3.97.
Meanwhile, the management remains confident about its strategic moves and is looking to rationalize its cost structure to improve its profitability.
CEO of PayPal, Dan Schulman said, “Our second quarter results were solid with currency neutral revenue and non-GAAP earnings growth exceeding expectations. We continue to gain share as we execute across our key strategic initiatives, even as we drive operational efficiency across our business.”
Blake Jorgensen Steps in as CFO
Recently, PayPal announced that former Electronic Arts (EA) executive Blake Jorgensen has joined the company as its Chief Financial Officer.
Jorgensen replaces John Rainey, and his appointment takes effect from Wednesday. Jorgensen served as the CFO and COO of Electronic Arts previously and was also the finance chief at lifestyle brand Levi Strauss (LEVI).
According to a regulatory filing, Jorgensen will receive a base salary of $750,000 along with an annual bonus with a target value of 125% of his annual pay. Furthermore, he will receive stock awards valued at $2 million, which consists of restricted and performance-based stock, as well as a supplemental restricted stock award valued at $8 million.
Key Takeaways
PayPal’s robust quarterly results and growth in some of the key operating metrics further position it as a leading player in the digital payments space. Furthermore, its active share buyback activities have also provided support to the company’s stock and rewarded investors.
However, declining profitability and margins continue to plague the company.
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