What to watch in PayPal earnings report
PayPal (PYPL) is scheduled to report results of its first fiscal quarter after market close on May 6, with a conference call scheduled for 5:00 pm EDT.
What to watch for:
1. OUTLOOK: On February 27, PayPal said that it had been “carefully assessing the effect of COVID-19 as conditions continue to evolve… PayPal’s business trends remain strong; however, international cross-border e-commerce activity has been negatively impacted by COVID-19.
We currently estimate the negative impact from COVID-19 to be an approximate one percentage point reduction, on both a spot and foreign currency-neutral basis, to PayPal’s year-over-year revenue growth for the first quarter, as compared to the revenue guidance provided on January 29, 2020.
Stronger performance quarter-to-date across our diversified business is partially offsetting this one percentage point negative impact. We now expect to report first quarter 2020 revenue toward the lower end of our previously guided range of $4.78B-$4.84B.”
The company also reaffirmed its Q1 GAAP and non-GAAP EPS guidance.
During the company’s last earnings call in late January, PayPal said it expected Q1 adjusted EPS between 76c-78c, and FY20 adjusted EPS of $3.39-$3.46.
2. ‘RAPID ADOPTION INCREASE’: In a research note to investors last month, Deutsche Bank analyst Bryan #Keane raised the firm’s price target on #PayPal to $147 from $127, while keeping a Buy rating on the shares.
The analyst believes the Street is underappreciating the “rapid adoption increase” toward e-commerce in the new COVID-19 world, with PayPal as one of the main beneficiaries of this trend. The surge in new online shoppers should drive “strong” net new active customers for the company, he contended.
3. TO WAIVE CERTAIN FEES, DEFER PAYMENTS: PayPal announced on March 31 a set of relief measures to help its more than 24M merchants around the world impacted by the coronavirus.
The company said it was waiving certain fees and deferring repayments on business loans for some of its most affected small business customers.
4. LENDING TO SMALL BUSINESSES: PayPal, Square (SQ), and Intuit (INTU) started lending to small businesses that couldn’t get access to COVID-19 relief funds through large U.S. banks, Bloomberg’s Olivia Rockeman and Edward Ludlow reported last month.
Fintech companies have been pushing to provide emergency loans since mid-March, over a week before the passage of a federal bill that crated the Paycheck Protection Program, the authors noted.
“The PPP program has manual checks and processes that require time, and we’re doing the best we can despite having tech that can operate at scale and efficiency,” said Brian Peters, executive director of Financial Innovation Now, an industry group whose membership includes PayPal and Square.
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