PayPal Shares Surge 35%, Fueled by Strong Growth and Partnerships

PayPal's stock rose 35% in the last six months, significantly outperforming the tech sector. With an expanding partner base and robust portfolio, the outlook seems positive. However, anticipated lower growth in Q4 may dampen immediate investor sentiment.

Date: 31-01-2025

AI Rating: 6

Earnings Per Share (EPS)
The Zacks Consensus Estimate for PayPal’s (PYPL) 2025 earnings is at $4.91 per share, indicating an increase of 7.13% over 2024’s estimated EPS of $4.58. This upward trend in earnings estimates suggests a positive sentiment regarding the company’s profitability moving forward.

Revenue Growth
Estimated revenues for 2025 stand at $33.07 billion, reflecting growth of 4.46% compared to 2024’s anticipated figure of $31.66 billion. This growth outlook, combined with recent earnings surprises averaging 15.14%, indicates a solid revenue trajectory.

Profit Margins
PayPal achieved a transaction margin of $3.7 billion, which grew more than 8% year over year. This growth is attributed to increased interest income, improved branded checkout, and operational enhancements in tech-led risk/loss. A growing transaction margin signals effective management of costs and a robust operational strategy.

Overall, while projecting a strong EPS and revenue growth alongside improved profit margins, PayPal's near-term forecast raises concerns about lower volume and revenue growth from specific products, particularly their Braintree services. Moreover, substantial increases in marketing expenses foreshadow potential pressures on profits in the fourth quarter of 2024. The outlook for non-transaction operating expenses in the low-single-digit range for 2024 might further restrain earnings growth. The current stock price trading at a discount (forward 12-month P/E of 17.91X compared to the industry average of 38.64X) contributes to a perception of value for long-term investors.

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