Table of Contents
1. PayPal (PYPL) – Earnings Review
PayPal provides branded omni-channel checkout and financial services to a massive base of consumers and merchants. It also provides non-branded payment processing through Braintree, payouts-as-a-service through Hyperwallet, identifiable guest checkout through Fastlane and it owns Venmo.
The deep dive is old and my opinion on the company has materially changed since posting it. For an accurate overview of PayPal’s financial and product trends, the last few earnings reviews and their investor day coverage are great places to go. Just type “PYPL” into the website search bar for a chronological feed.
a. Key Points
Bad branded checkout trends.
Pulled Investor Day targets
Strong Venmo growth.
Accelerating Braintree growth.
b. Demand
Missed transaction margin dollar (TM$) estimate by 1%. 3.5% Y/Y TM$ growth also missed its 2.5% Y/Y growth guidance.
Missed revenue estimate by 1.3%.
3% foreign exchange neutral (FXN) growth missed 4.5% FXN growth estimates.
Beat TPV by 0.8%.
TPV growth enjoyed a 3-point FX tailwind.
Met account estimates.
Missed transactions per active (TPA) estimates by 1%.
More stats:
Other value-added services revenue rose by 10% Y/Y. This was driven by merchant credit growth rather than software traction.
Transactions per active rose 5% Y/Y excluding Braintree contract renegotiations. Branded transactions per active exclude this noise.
c. Profits & Margins
Met 46.5% transaction margin dollar estimates.
Missed $1.29 EPS estimate by $0.06 & missed guidance by $0.06.
Missed EBIT estimates by 2%.
Missed FCF estimates by 10% & missed guidance by 20%.
Profit growth was held back by a higher-than-expected tax rate and lower operating income.
d. Balance Sheet
$10.4B in cash & equivalents.
$4.3B in LT investments.
$10B debt.
Share count fell by 7.5% Y/Y.
e. Guidance & Valuation
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