PayPal (PYPL) Holdings is a globally recognized digital payment solution provider. The company plans to release its third-quarter earnings at the end of the day today. From July 1 to September 30, PayPal Holdings took significant strides to expand its operations. Notably, the company’s strategic decisions are forward-looking and seem to be full of promise.
In my opinion, PayPal Holdings stock could see decent growth in the fourth quarter of 2019. Considering PayPal’s present downtrend, I believe this is the right time to buy and hold this stock.
PayPal expands in Europe
At the beginning of July, PayPal announced a partnership with British digital bank Monese. The collaboration with Monese has the potential to increase PayPal’s access to customers in the UK and Germany.
In mid-July, PayPal announced that Xoom, an international money transfer service, would expand to 32 countries in Europe. The launch of Xoom gave the company broader access to customers across the European region.
PayPal in China
PayPal was in the limelight toward the end of September. On September 19, PayPal announced a Senior Notes offering and issued debt notes for $5 billion on September 26.
On September 30, PayPal made a significant announcement. Amid the trade war, PayPal managed to acquire the Chinese digital payment solution provider GoPay. The People’s Bank of China approved a 70% purchase of a stake in GoPay through PayPal’s subsidiary in Shanghai.
The acquisition of GoPay is a massive step for PayPal. With this purchase, it would be the first overseas company to acquire a majority stake in the Chinese digital payments market. Although GoPay has made the agreement public, the specifics of the deal haven’t been released officially.
Notably, China is still an untapped market in the online payment domain. In my opinion, the vast customer base and underserved Chinese digital payments industry could add significantly to PayPal’s revenues.
A negative Q3 results outlook
On October 8, the company released an advance statement, hinting that its third-quarter results might not be favorable. PayPal Holdings filed an 8-K with the SEC, making the announcement public. In the filing, the company suggested that some of its strategic investments fell in value, which could affect its Q3 earnings income.
The company made strategic investments worth $500 million in Uber Technologies (UBER) and invested $750 million in Mercado Libre, an Argentina-based e-commerce company. Both investments have dropped in value. The company is expecting a loss of up to $228 million, and it expects its after-tax loss to reach $177 million.
PYPL stock trends: July 1–October 22
PayPal stock started the third quarter of 2019 on a positive note. Its stock saw an uptrend from July 1 to July 24. On July 24, the stock was trading above $120.
The digital payment solutions provider released its Q2 2019 earnings results on July 24 after the market closed for the day. The next day, PYPL stock opened in a downward spiral and came crashing down to $113 in the initial hours of trading. The stock’s single-day decline was around 6%. The company had downgraded its revenue outlook for Q2 2019, which led to the stock facing headwinds.
The spiral continued and by the first week of August, the stock slumped to about $102. In August, PayPal stock saw some volatility, but it was trading in the range of $102–$112. At the beginning of October, PayPal dropped below the $100 threshold. The stock closed at $97.36 at the end of the trading day on October 22.
What are PYPL’s Q3 2019 forecasts?
PayPal plans to release its third-quarter earnings on October 23 after the market closes on Wednesday. For the previous four quarters, the company’s reported results were much better than the analyst forecasts.
In the second quarter, analysts estimated EPS (earnings per share) of $0.56, whereas its actual EPS for the period reached $0.68. For Q3 2018, analysts expected EPS of $0.39 in comparison to the actual EPS of $0.42.
For the upcoming Q3 2019 earnings release, 11 analysts from Zacks Investment Research estimate PayPal’s average EPS to be $0.44. Other sources forecast that its Q3 EPS could be $0.51–$0.55. The same source suggests that the estimated revenue growth for Q3 2019 would be approximately 18%. Plus, PayPal’s revenues could reach $4.24 billion–$4.38 billion.
On October 22, PayPal Holdings had a market cap of approximately $114 billion, and its price-to-earnings ratio was 46.36.