PayPal Q1 earnings: ‘we own it because it’s cheap’

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on May 8, 2023
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  • PayPal Holdings reports a solid Q1 and raises its full year guidance.
  • Karen Firestone remains bullish on the digital payments company.
  • PayPal stock is currently down about 4.0% versus the start of 2023.

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Shares of PayPal Holdings Inc (NASDAQ: PYPL) are trading down in extended hours even though the digital payments company reported market-beating results for its fiscal first quarter.

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Is it an opportunity to buy PayPal stock?

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The price action is all the more intriguing considering executives raised guidance as well.

PayPal now sees high-single-digit growth in its revenue this year on $4.95 of adjusted per-share earnings. In comparison, analysts were at $4.89 a share.

The post-earnings reaction may be an opportunity to buy PayPal stock if you’re in the same league as Karen Firestone of Aureus Asset Management.

The management is adamant that they’re going to be growing revenues. It’s still 40% market share in online payments. Venmo is growing like crazy. They have this alliance with Visa that’s boosting business.

PayPal shares are trading at a discount

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CEO Dan Schulman attributed the encouraging outlook partially to better-than-expected strength in eCommerce.

Total payment volume was $354.5 billion in the recently concluded quarter – well ahead of expectations. In a recent CNBC interview, Firestone said:

It’s a company that’s in the process of having to change themselves. We think they are. But the market doesn’t seem be paying attention. We own [PayPal stock] because it’s cheap at under 16 times this year’s earnings.

Earlier this year, the financial technology company undertook cost savings initiatives, including lowering its headcount by 7.0%.

Notable figures in PayPal Q1 earnings report

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  • Net income printed at $795 million versus the year-ago $509 million
  • Per-share earnings also climbed significantly from 43 cents to 70 cents
  • Adjusted EPS came in at $1.17 as per the earnings press release
  • Revenue went up about 9.0% on a year-over-year basis to $7.04 billion
  • FactSet consensus was $1.10 a share on $6.98 billion in revenue

PayPal stock is down 4.0% for the year at writing.

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