Author: Mania Saini
(Reuters) – PayPal raised its full-year adjusted profit forecast for the second time on Tuesday after strong performance in its branded checkout business and easing competition concerns, sending its shares up 9% in early trading.
Tech giants Apple and Google parent Alphabet have expanded into digital payments in recent years, leading analysts and investors to worry that they could eat into PayPal's market share in their mainstay businesses.
“If we narrow it down to desktop/web, which is 40% to 50% of all checkouts, our share has not declined over the past four years,” Chief Executive Alex Chriss said on a conference call with analysts. .
Despite feeling the pinch from rising utility and credit card bills, U.S. consumers remain resilient. PayPal is betting that spending will remain resilient during the critical back-to-school season and the upcoming holiday shopping season.
The company now expects “low to mid-double-digit” adjusted profit growth in 2024, compared with “mid-to-high single-digit” growth forecast in April.
Its adjusted earnings per share rose to $1.19 in the three months ended June 30, compared with 87 cents a year earlier.
“While gross profit beat expectations, the magnitude of the increase was unexpected,” Jefferies analysts said.
Total payments volume grew 11% in the second quarter to $416.81 billion, while revenue grew 9% to $7.89 billion on a currency-neutral basis.
Turnaround is underway
Total brand checkout payment volume grew about 6% in the second quarter, easing investor concerns that were weighing heavily on the stock.
PayPal said branded checkouts, Braintree and Venmo contributed to the highest transaction profit growth in 2021.
Chief Financial Officer Jamie Miller said in a conference call with analysts that the company expects sales and revenue growth to decline in the second half, consistent with its plan to prioritize high-quality earnings growth.
“This is well thought out and shows good progress,” she said.
Trading margins increased 8% this quarter to $3.61 billion, exceeding expectations for a nearly 1% increase.
“We've returned the company to transactional margin growth, we've returned the company to consumer user growth, we've significantly improved Braintree profitability, and we're accelerating Venmo,” Chriss said.
PayPal's adjusted operating margin expanded 231 basis points to 18.5% in the quarter due to cost cutting and restructuring efforts.
(Reporting by Manya Saini in Bengaluru; Editing by Pooja Desai)
