PayPal Q3 earnings: Eyes on competition concerns, margins

PayPal (NASDAQ:PYPL) is expected to report its third quarter results on October 29, Tuesday, and investors will be keen to see if competition concerns have indeed impacted the firm’s performance.

The consensus EPS Estimate is $1.07 (-17.7% Y/Y) and the consensus Revenue Estimate is $7.89B (+6.6% Y/Y).

Several analysts, however, believe that competition concerns will not impact the firm much.

“PayPal’s growth is driven by Venmo’s user engagement, omnichannel payments, AI-leveraged advertising, and cryptocurrency integration, despite regulatory and competitive challenges,” said Seeking Alpha analyst Grassroots Trading.

Regulatory risks from CFPB’s new BNPL rules and the upcoming presidential election could impact PayPal’s operational costs and regulatory landscape, Grassroots Trading added.

In May, the U.S. Consumer Financial Protection Bureau issued Wednesday an interpretive rule that will treat buy now, pay later lenders essentially the same as credit-card issuers for the purpose of consumer protection.

In October, the Financial Technology Association, a fintech trade group representing buy now, pay later providers, said it was suing the U.S. Consumer Financial Protection Bureau to block a new rule that would apply credit card protections to the BNPL market.

The payment company has also expanded its presence through multiple partnerships with companies like Amazon (AMZN), and Shopify (SHOP), among others.

PayPal’s new CEO, Alex Chriss, is fostering partnerships with competitors, enhancing user value and driving higher-margin products, Seeking Analyst Uttam Dey said.

“Venmo’s growth and deeper product integrations are contributing significantly to PayPal’s margin expansion and user engagement,” Dey added.

“Progress on transaction margin dollars, revenue growth, and earnings growth are all likely to dip from the levels seen in Q2,” said Seeking Alpha analyst The Alpha Sieve.

The firm, was, however, downgraded by Bernstein on competition and valuation concerns.

Last quarter, the payments tech company turned in stronger-than-expected Q2 earnings and revenue, boosted its 2024 earnings guidance, and raised its share repurchase outlook.

Over the last 2 years, PYPL has beaten EPS estimates 88% of the time and has beaten revenue estimates 100% of the time.

Over the last 3 months, EPS estimates have seen 28 upward revisions and 0 downward. Revenue estimates have seen 5 upward revisions and 21 downward.

Shares in the company were up 35.4% since the start of the year.