PayPal Holdings (PYPL) stock is sinking Tuesday despite the payments company beating top- and bottom-line expectations for its fourth quarter and issuing a better-than-expected first-quarter and full-year outlook.
In the three months ending December 31, PayPal's revenue increased 4.2% year over year to $8.4 billion. Earnings per share (EPS) rose 4.4% from the year-ago period to $1.19.
"We set out at the beginning of 2024 to narrow our focus, improve execution, and reposition the business," said CEO Alex Chriss in a statement. "One year later, I'm proud that we've laid a strong foundation for long-term, profitable growth across the company's most important areas." Chriss cited improvements to branded checkout, peer-to-peer and Venmo as well as progress on the company's price-to-value strategy.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The results topped analysts' expectations. Wall Street was anticipating revenue of $8.3 billion and earnings of $1.12 per share, according to CNBC.
PayPal's total payment volume increased 6.8% to $437.8 billion in the quarter, driven by active accounts increasing 2.1% to 434 million and payment transactions per active account increasing 3% to 60.6 on a trailing-12-month basis.
For the first quarter, PayPal said it expects to achieve earnings in the range of $1.15 to $1.17 per share, ahead of analysts' expectations for earnings of $1.13 per share. For the full year, it expects earnings of $4.95 to $5.10 per share, also ahead of Wall Street's forecast for earnings of $4.90 per share.
"The strong momentum we've created sets us up well for 2025, which is about scaling adoption," Chriss said.
Is PayPal stock a buy, sell or hold?
During the 12 months leading up to its earnings announcement the large-cap stock outperformed the S&P 500, rising 43.4% vs 22.5% for the index. And Wall Street remains bullish on the payments stock.
According to S&P Global Market Intelligence, the average analyst target price for PYPL stock is $96.25, representing upside of more than 17% from current levels. And the consensus recommendation is Buy.
Financial services firm Mizuho has an Outperform rating (equivalent to a Buy) and $100 price target on the financial stock.
"Expectations likely ran ahead of themselves," said Mizuho analyst Dan Dolev in response to the market's initial reaction to PayPal's earnings report. "We are not concerned," Dolev added, noting that PayPal’s "branded button has been consistently growing in line with its major merchant partners."
In a recent research note, Dolev said his analysis "shows that PYPL is growing in line with/faster than the weighted-average, share-adjusted growth of its major partners."
The analyst noted that stability in its branded segment as well as new initiatives including PayPal Everywhere, gradual migration of merchants to an updated checkout experience and Fastlane "makes the stock an attractive candidate for further re-rating in 2025."
Related Content
- Earnings Calendar and Analysis for This Week
- Analysts' Top S&P 500 Stocks to Buy Now
- Stock Picks That Billionaires Love
-
Don’t Let Your Dreams Go Unfulfilled: Plan for Your Passion in RetirementFollow these three steps to ensure you are emotionally and financially prepared for your passion in retirement.
-
I Heard Tariffs Will Cost Families $2,800 This Year. I'm a Retiree on a Fixed Income. How Can I Prepare?We ask retirement planning experts what to do.
-
What to Know About Multisector ETFsMultisector bond funds allow investors to pick and choose among a wide array of assets.
-
I'm an Estate Planning Attorney: These Are the Two Legal Documents Everyone Should HaveEvery adult should have a health care proxy and power of attorney — they save loved ones time, money and stress if a sudden illness or injury leaves you incapacitated.
-
I'm a Financial Professional: Here's My Investing Playbook for Political UncertaintyFor successful long-term investing in a politically charged environment, investors should focus on economic data, have a diversified portfolio and resist reacting to daily headlines.
-
Rally Pauses for Hot Earnings, Cool Data: Stock Market TodayMarkets were mostly mixed Tuesday after decisive moves Friday and Monday.
-
The Truth About the Dark Side of Rooftop Solar PanelsRampant bankruptcies in the solar panel industry have left many consumers with systems that don't work and no way to get them fixed. Worse, they're being hounded to keep paying despite not receiving what they were promised. What can they do?
-
Six Big Beautiful Opportunities: Advisers' Guide to Tax and Client StrategiesHere are several ways financial professionals can help their clients maximize opportunities in the One Big Beautiful Bill Act, which extends key TCJA provisions, introduces increased deductions for people 65 and older and more.
-
Dow Rises 585 Points on Rate Cut Hope: Stock Market TodayStocks moved more than 1% again Monday, this time to the upside following the Jobs Friday sell-off.
-
How Big Will the Fed Rate Cut Be This Fall?A dismal July jobs report has lifted expectations for fall rate cuts. How low could the fed funds rate be by year's end?
