Should You Buy, Sell, or Hold PayPal Stock Before Q1 Earnings?

PayPal PYPL is set to report its first-quarter 2025 results on April 29.

PYPL expects flat to low single-digit revenue growth on a currency-neutral basis for the to-be-reported quarter. Non-GAAP earnings are expected between $1.15 per share and $1.17 per share, suggesting 6-8% growth on a year-over-year basis. 

The Zacks Consensus Estimate for first-quarter revenues is pegged at $7.83 billion, indicating an increase of 1.64% from the year-ago quarter’s reported figure. 

The consensus mark for earnings stands at $1.15 per share, down by a penny over the past 30 days, suggesting a decline of 17.86% from the figure reported in the year-ago quarter.
 

PayPal Holdings, Inc. Price and Consensus

PayPal Holdings, Inc. price-consensus-chart | PayPal Holdings, Inc. Quote

PayPal’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, with an average surprise of 14.26%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Let’s see how things have shaped up for the upcoming announcement.

Strong Portfolio, Rich Partner Base to Aid PYPL’s Q1 Results

PYPL’s first-quarter results are expected to reflect portfolio strength. Fastlane, which enhances the guest checkout experience by allowing users to complete their purchase in one click, remains noteworthy. Strong monetization efforts of Venmo are likely to have aided Total Payments Volume in the to-be-reported quarter. 

PYPL’s rich partner base, which includes Amazon AMZN, Shopify SHOP, Apple, Alphabet and Meta Platforms META, has been a key catalyst. The integration of PayPal and Venmo credit or debit cards into Apple Wallet has been a noteworthy development. 

PayPal is now an additional processor for Shopify Payments in the United States. Its branded checkout solutions are now integrated into Shopify Payments. This creates a single and unified experience for business owners to drive operational efficiency. PayPal’s partnership with Amazon now brings PayPal Checkout to SMBs, offering Buy with Prime. Its collaboration with Apple and Google to integrate the Venmo debit card with Apple Pay and Google Pay has been a noteworthy development.

PayPal is a top payment method for advertisers and consumers globally across Meta Platforms’ family of apps. Creators and developers are using Hyperwallet. META also uses Braintree for credit card processing.

PayPal is expanding value-added services to boost the merchant experience. In the fourth quarter of 2024, PYPL launched FX-as-a-service, which is an automated currency conversion, and the platform is already live on Meta Platforms. PYPL’s network tokens for automated billing capabilities are live with merchants, including Instacart, Mint Mobile and Poshmark. Expanding value-added services is expected to drive transaction margin in dollar terms. PayPal Everywhere, which was launched in September 2024, is driving significant increases in debit card adoption and opening new categories of spend.

PYPL Shares Underperform Sector, Industry

Paypal shares have declined 23.8% year to date, underperforming the Zacks Business Service sector’s fall of 2.8% and the Zacks Internet Software Industry’s drop of 0.8%.

PYPL Stock’s Performance

PayPal stock is cheap, as suggested by the Value Score of B.

In terms of the forward 12-month Price/Sales ratio, PYPL is trading at 1.91X, lower than the industry’s 6.33X.

Price/Sales (P/S) Ratio

PayPal Benefits From Expanding Portfolio

Portfolio strength has been helping PayPal maintain deep and trusted relationships with merchants and consumers. Its two-sided platform helps develop direct financial relationships with customers and merchants. PYPL’s investments in improving branded checkout, person-to-person (P2P) and Venmo helped in driving total active accounts.

Strong adoption of Fastlane is expected to boost future volumes as PYPL ink deals with NBCUniversal, Roku and StockX. PayPal expects transaction margin in dollar terms (ex-interest on customer balances) to grow at least 5% in 2025 and high-single-digit growth for 2027. Over the long term, this is expected to grow at more than 10%.

PYPL - Buy, Sell or Hold?

PayPal rides on the growing demand for peer-to-peer payments and digital wallets. Hence, investors who already own the stock may expect PYPL's growth prospects to be rewarding over the long term. However, PYPL’s near-term prospects are full of challenges due to challenging macroeconomic conditions, unfavorable forex, and sluggish consumer spending. 

PayPal currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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