PayPal Holdings (PYPL) stock jumped out of the gate Tuesday after the payments giant beat top- and bottom-line expectations for its second quarter, raised its full-year outlook and increased its share repurchase forecast.
In the three months ended June 30, PayPal's revenue increased 8.2% year-over-year to $7.9 billion, driven in part by a nearly 11% rise in total payment volume to $416.8 billion. The company also said earnings per share (EPS) were up 36.8% from the year-ago period to $1.19.
"PayPal delivered a strong second quarter and first half, and I'm confident we're on the right track," said PayPal CEO Alex Chriss in a statement. "We delivered our best transaction margin dollar growth since 2021, and we are making steady progress on our strategic transformation, while investing in innovation and operating more efficiently."
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The results beat analysts' expectations. Wall Street was anticipating revenue of $7.8 billion and earnings of 99 cents per share, according to Yahoo Finance.
"Given the strength of our business, we are raising our 2024 guidance and increasing share repurchases," Chriss said.
PayPal now anticipates EPS growth in the low to mid-teens percentage, up from its previous forecast of mid- to high-single digit growth. It also now expects to buy back roughly $6 billion of its own shares, up from its prior forecast of at least $5 billion. Stock buybacks can boost value for shareholders.
PayPal also provided its third-quarter guidance, projecting mid-single-digit revenue growth and high single-digit earnings per share growth.
"We are operating from a position of strength, delivering for our customers, and focusing on long-term profitable growth," Chriss added.
Is PayPal stock a buy, sell or hold?
PayPal is lagging the broader market on the price charts this year, up 5% vs the S&P 500's more than 14% return. Yet Wall Street remains bullish on the financial stock.
According to S&P Global Market Intelligence, the average analyst target price for PYPL stock is $76.92, representing an upside of roughly 20% to current levels. Additionally, the consensus recommendation is Buy.
Financial services firm Susquehanna Financial Group recently upgraded PayPal to Positive (equivalent to a Buy) from Neutral (equivalent to a Hold).
"Our conversations with the company, which when coupled with customer and industry observations, seem more constructive," said Susquehanna analyst James Friedman in a July 2 note. "Profitable growth is now a top priority for PayPal, enshrined in a recent update to the company's 2024 Annual Incentive Plan."
Friedman has a $71 price target on PayPal, which is 11% above where the stock is currently trading.
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