PayPal falls short of analysts’ estimates for earnings and revenue in the first quarter

PayPal Holdings Inc. (NASDAQ: PYPL) posted a weaker than expected earnings report on Wednesday. The company attributed its downbeat performance to the Coronavirus pandemic that hit the hardest in March. In April, however, the company said that trends were already starting to recover. PayPal announced May 1^st to have posted the highest transaction volume in the company’s history.

Following the release of the financial report, PayPal was reported 8.5% up in extended trading on Wednesday.

PayPal’s Q1 financial results versus analysts’ estimates

According to FactSet, analysts had forecast the company to print £3.84 billion in revenue in the first quarter. Their estimate for earnings per share (EPS) was capped at 60.7 pence. In its report on Wednesday, however, PayPal fell short of both estimates posting a lower £3.74 billion in revenue in Q1 and 53.4 pence of adjusted earnings per share. The company also ascribed a 13.7 pence earnings hit to CECL (Current Expected Credit Loss) in the recent quarter.  

In the comparable quarter last year, PayPal’s revenue was recorded at £3.35 billion. At £68 million, PayPal’s net income in the first quarter came significantly lower than the year-ago figure of £540 million.

PayPal boasted £154.75 billion worth of payments processed in Q1. In the first quarter last year, the company had processed £130.85 billion of payments. Experts, on the other hand, had expected it to process an even greater £158.15 billion of payments in the recent quarter.

PayPal’s guidance for the second quarter

In April, total processed payments saw a 22% year over year increase to £55.09 billion. Revenue last month was also 20% up (currency-neutral basis). PayPal’s core platform added a total of 10 million new active accounts in Q1. 7.4 million of these were registered in April (a new monthly record).

On a currency-neutral basis, PayPal estimates a 15% growth in its revenue and adjusted earnings in the second quarter. The company also forecasts to add 15 to 20 million new active accounts in Q2.

Including the surge in after-hours trading on Wednesday, PayPal is around 25% up year to date in the stock market. In comparison, the benchmark S&P 500 index has lost more than 10% in 2020 so far.

PayPal has recovered over 60% from its low of £69 per share on March 23^rd. At the time of writing, the online payments system has a market cap of £121.92 billion and a price to earnings ratio of 61.99.