PayPal Q2 Earnings Preview: Bullish Setup, Rising Volumes, and Key Expectations
PayPal Q2 Earnings Preview: Bullish Setup, Rising Volumes, and Key Expectations
Cost-Cutting measures need to deliver to support the stock price
- PayPal earnings are scheduled for before the market opens tomorrow.
- Traders are looking for earnings per share of $1.30 on $8.08 billion in revenue.
- Prices recently cleared the 200-day simple moving average, offering a bullish signal ahead of the report.
PayPal (PYPL) is scheduled to report second-quarter earnings tomorrow before the market open. The stock is up about 40% since April when market turbulence from the US trade war dragged stocks lower. The company has managed to outpace the S&P 500 since then, which was up about 32% over the same period. The report comes amid a busy week for earnings that could influence sentiment for the broader market.
Investors are looking for increased payment volume from higher-priced items alongside cost reduction efforts to help boost earnings. PayPal saw a 3% year-over-year increase in payment volume during the first quarter, which came alongside a modest reduction in expenses. Together, that helped lift the company’s earnings per share (EPS).
Investors will want to see how PayPal’s cost-cutting efforts are evolving, which is essential to the company’s full-year guidance. Increased competition from Apple and other payment vendors is also under a close eye. Meanwhile, PayPal has continued to improve its user offerings, with the latest allowing users to link their cryptocurrency wallets to merchant checkouts.
So far, earnings have been mostly positive for U.S. companies, which may speak to an economy supportive of a company relying on payment transactions. Positive news flows on tariffs have also helped ease concerns for the broader economy, which can be seen as another positive for the company through the rest of the year.
What do investors expect?
According to TradingView, investors anticipate PayPal will post an EPS figure of $1.30 on $8.08 billion in revenue. That would compare to an EPS of $1.19 on $7.88 billion in revenue a year ago. Last quarter, PayPal reported an EPS of $1.33 on $7.78 billion.
PayPal has a solid history of beating EPS estimates, doing so consistently over the last year. However, it has missed revenue estimates in two of the last four quarters.
Analysts are mainly neutral to bullish on the stock, with 20 strong buy and buy ratings, 21 hold ratings and three strong sell ratings. The average one-year price target is 82.34, which represents a 5% increase from Monday’s 78.44 stock price.
Trading PayPal earnings
PayPal traded with an implied volatility rank (IVR) of 27.4, meaning that volatility is lower than it has been over the past year. This comes alongside subdued volatility in the broader market, with S&P 500 futures (/ES) trading with a 12.5 IVR.
The options market expects a post-earnings move of +/- 5.05 points, or 6.4% of the current stock price. That’s on the lower range of the average 5% to 10% move for S&P 500 companies.
The technical setup for PYPL has improved recently after prices crossed above the 200-day simple moving average (SMA) last week. This came after a failed breakout at the 200-day SMA earlier this month. Still, prices would need to rise another 10 points before recovering levels that were traded at before prices sold off heavily in early February.
The 50-day SMA has supported prices several times over the past two months, which could come back into play if prices fall after the earnings report.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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