PayPal Q4 preview: Where next for PayPal stock?

Josh Warner
By :  ,  Former Market Analyst

When will PayPal release Q4 earnings?

PayPal will publish fourth quarter and full year earnings on Tuesday February 1.


PayPal Q4 earnings preview

PayPal is facing some tough comparatives over the coming quarters following last year’s record performance as it has capitalised on the spike in online payments since the start of the pandemic.

PayPal is expected to report 14.9 million net new active accounts in the quarter. That would be the best performance of 2021 but still down 6.6% from the year before. It is expected to have added 54.1 million accounts on a net basis over the full year, down 25% from 2020 when it almost doubled the number of accounts as more shopping shifted online.

Some analysts believe PayPal could surprise the market depending on uptake for its new ‘super app’ that was launched last September. This should be the first time we get an insight into early uptake of the app, which combines a slew of PayPal’s services from deposits and paying bills to its new crypto functions and shopping tools. This marks a move for PayPal from facilitating payments on behalf of others to an all-in-one finance app.

Total payment volumes (TPV) are set to continue growing to a new record high with a 24% year-on-year rise pencilled in by analysts to $343 billion. PayPal has said TPV will be up around 31% to 32% at constant currency over the full year, and analysts think this will come in slightly higher at 33%.

Investors will be keen to know how Venmo is performing, especially as it is being introduced as a payment option in the US on Amazon. The unit has been growing payment volumes at a significantly faster pace than the wider business and is seen to rise over 36% in the fourth quarter, in-line with what was delivered in the third.

They will also be looking for news on Japanese Buy Now, Pay Later firm Plaidy, which PayPal acquired for $2.7 billion last year to give it a foothold in the country’s domestic market to compliment its existing cross-border ecommerce business.

Cryptos will also be on the radar as PayPal continues to push into the sector by launching a service allowing UK users to buy, sell and hold cryptocurrencies and introducing a Cash Back to Crypto service to Venmo credit card holders that automatically funnels cash back earned on purchases to buy cryptocurrencies.

Wall Street forecasts overall revenue will rise over 12% to $6.89 billion from $6.12 billion the year before. Adjusted EPS is expected to increase 3.8% year-on-year to $1.12 from $1.08, but reported EPS at the bottom-line is set to fall over 40% to $0.79 from $1.32 because it excludes any gains made on its investment portfolio – whereas this provided a $0.60 boost to EPS in the fourth quarter of 2020.

For the full year, PayPal has said it expects to deliver 19% growth in adjusted EPS to $4.60 and 2.3% growth in reported EPS to $3.62 in 2021.

We should also get PayPal’s initial view on how 2022 will shape up. Wall Street currently believes PayPal can add 13.1 million net new active accounts in the first quarter of 2022, deliver 12% year-on-year revenue growth to $6.76 billion and adjusted EPS of $1.17.

The consensus suggests PayPal can deliver 18% revenue growth over the full year in 2022 and grow adjusted EPS to $5.20.


Where next for PYPL stock?

PayPal shares have almost halved in value since climbing to an all-time high of $310 last July.

Sellers managed to push the stock down to a 7-month low at $152 at the start of this week, which should prove to be a floor considering that was a key level of support throughout the first half of June.

The fact the RSI has recently slipped into oversold territory supports the view that this is the immediate level of support, although the indicator slipped far deeper before finding support the last time this happened during November. That said,, the 50-day sma trades well below the 100-day sma, which in turn is also significantly below the 200-day sma, supports the bearish view that the stock has further room to fall. If PayPal shares breach the $152 floor, then they could fall to as low as $139. A move below here would be more significant as it opens the door to sub-$120.

The 50-day sma has acted as a ceiling for the share price on several occasions since last September, when the current downtrend started. It has been over four months since it last traded above the short-term moving average, which currently sits at $186, making this the immediate upside target. Only then can it start to eye the 2022-high of $196. Any move above there opens the door to much greater potential upside toward $215.

PayPal shares have trended lower since late 2020


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