PayPal Holdings Inc (Nasdaq: PYPL) reported some impressive second-quarter growth numbers on Wednesday, but investors initially took profits following the report. Despite a disappointing quarter, analysts say PayPal remains one of the best ways for investors to bet on long-term, secular e-commerce growth.
PayPal reported second-quarter adjusted earnings per share of 58 cents on revenue of $3.86 billion. Both numbers topped consensus analyst estimates of 57 cents and $3.81 billion, respectively. Revenue was up 23 percent from a year ago.
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GAAP operating margin in the second quarter was 14.8 percent, up from 14.5 percent last quarter. PayPal added 7.7 million active accounts, up 18 percent from a year ago. PayPal handled 2.3 billion payment transactions, up 28 percent. Total payment volume in the quarter was $139 billion, up 29 percent.
PayPal also reported 35.7 payment transactions per active account on a trailing 12-month basis, up 9 percent from a year ago.
However, with the stock up more than 20 percent since PayPal’s last quarterly report, investors were hoping for even better numbers from the digital payments leader. PYPL stock traded lower by nearly 4 percent following the report.
“Our customer choice initiatives, partnership strategy and continued focus on being a customer champion are contributing to our sustained strong performance,” CEO Dan Schulman says in a statement.
Looking ahead, PayPal raised its full-year 2018 revenue growth guidance range from 17 to 18 percent to a range of 17 to 19 percent. PayPal also slightly raised its full-year EPS guidance from between $2.31 and $2.34 to a new range of between $2.32 and $2.35.
In the third quarter, PayPal is guiding for revenue of between $3.62 billion and $3.67 billion and EPS of between 53 cents and 55 cents.
Bank of America analyst Jason Kupferberg says PayPal remains a wise long-term investment. “In our view, no company in our coverage universe is better-positioned than PYPL to capitalize on the inexorable trend favoring the global mix shift of payments from offline to online/digital channels,” Kupferberg says.
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Kupferberg says PayPal is the best pure-play on e-commerce growth. “Given these powerful secular tailwinds, PYPL’s very attractive top-line growth profile, prospects for margin expansion, and potential for accretive balance sheet deployment, we see scarcity value in this stock.”
Bank of America has a “buy” rating and $98 price target for PYPL stock.
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PayPal Holdings Inc (PYPL) Earnings Beat Isn’t Good Enough originally appeared on usnews.com
