• Q3 stock down 7% ahead of the Q3 report.
  • Q3 earnings and revenue are expected above estimates.
  • The focus will be on total payment volume and strides on cryptocurrencies.

PayPal Holdings Inc. (NASDAQ: PYPL) is scheduled to report its Q3 2021 results on November 8, 2021, after the market closes. It heads into the earning session, coming under immense pressure to broaden its business scope beyond electronic payments. However, it has denied claims it is planning to acquire Pinterest for $45 billion in the recent past.

Image showing PYPL underperformance

The earnings come at a time the stock has underperformed the overall market. The stock is down by about 7% year-to-date and down by about 26% from all-time highs recorded in August. In contrast, the S&P 500 is up by more than 20% year to date.

Ahead of the earnings, PayPal boasts an impressive track record of earnings and sales growth dating back to 2010. Consequently, it is well-positioned to deliver better-than-expected results driven by the evolution of digital payments. The company sits at an intersection of transformative secular tailwinds as digital payments become the new norm.

Efforts towards strengthening the services portfolio should be one of the catalysts if PayPal is to deliver upbeat Q3 results. The company is believed to have gained traction across customers in the quarter following the addition of the digital point of sale solution PayPal Zettle.

It also enabled the pay in 4service that allows customers to buy now and pay later. The results should also reflect significant strength on key product lines, including Venmo and One Touch.

Q3 earnings expectations

PayPal heads into the Q3 earning session, having registered 676.8 million unique visitors in the third quarter across all devices representing a 14.04% year-over-year increase. Website visits have increased significantly over the past year, up 19.10% for the nine months of the year.

Wall Street expects the electronic payment giant to report sales of $6.23 billion, representing a 14.14% year-over-year increase. Management on its part expects revenue in the range of between $6.15 billion and $6.25 billion, which will represent a 13% to 14% increase. Revenue in the second quarter was up 17% year-over-year to $6.24 billion.

On the other hand, earnings per share are expected to come in at $1.07, in line with what was delivered the same quarter last year. Management also expects EPS of about 1.07. In the second quarter, PayPal delivered an EPS of $1.15, up 8% year over year.

What to look out for when PayPal reports

When PayPal reports, the focus will be on the total payment volume, which the company handled in the third quarter. In the second quarter, the company saw a 40% increase in TPV to $311 billion fuelled by strong demand for digital payments.

It will be interesting to see if the TPV is still growing with the opening of the global economy in the aftermath of the pandemic. For the full year, the company expects TPV growth of between 33% to 35%, which should support a 20% increase in revenues.

While revenue was up by 17% in the second quarter, PayPal registered a 47% decline in net new active accounts year-over-year to 11.4 million. Consequently, investors will want to see whether the company was able to attract more new users’ year-over-year in the third quarter.

In addition, the focus will be on the strides PayPal is making in the cryptocurrency space. In the third quarter, the company enabled the ability that allows users to buy, hold, and sell digital currencies directly from their accounts.

Bottom line

While PayPal sentiments have taken a significant hit going by a 20% plus slide in the stock from an all-time high, the Q3 report could be the catalyst to reinvigorate investor interest. A better than expected report should affirm underlying growth likely to fuel a bounce back from current levels. Similarly, a disappointing earnings report that affirms slow growth in the aftermath of the pandemic could arouse concerns that could see the stock edge lower.