PayPal’s weak margin overshadows positive spending outlook.
PayPal's weak margin overshadows positive spending outlook.
PayPal Shares Fall as Margins Disappoint, CEO Remains Optimistic
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Aug 2 (ANBLE) – PayPal Holdings (PYPL.O) shares fell 7% in extended trading on Wednesday as investors were disappointed by the payments firm’s quarterly operating margin, even as executives said they expect improvement towards the end of the year.
Concerns Over Margins
Underwhelming margins at PayPal have been worrying analysts in recent quarters. The company’s low-margin business products have grown strongly, while growth in its branded products has slowed due to increased pressure from competitors like Apple (AAPL.O). The market has been eagerly waiting for signs of improvement in this area.
Optimism for the Future
“In a bright spot, PayPal CEO Dan Schulman said that as inflation cools the company expects discretionary spending to rebound and drive e-commerce growth. So one of the headwinds we faced was e-commerce growth slowing. Now it’s accelerating again,” he added.
PayPal’s total payment volume surged 11% in the second quarter to $376.5 billion, benefiting from resilient consumer spending trends. This growth reflects the ongoing theme of resilient consumer spending in the face of broader macroeconomic uncertainty, as highlighted by Kevin Kennedy, an analyst at research firm Third Bridge.
Positive Revenue Outlook
Banking on the continued steady use of its platform, PayPal expects third-quarter revenue of about $7.4 billion, above analysts’ estimates of $7.32 billion, according to Refinitiv data. This optimistic revenue outlook is supported by the company’s forecast for adjusted profit per share for the current quarter, which falls in a range of $1.22 and $1.24 – above analysts’ estimates of $1.22.
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Strides Towards Succession
Apart from financial performance, Schulman also mentioned that the company is in the final stages of selecting his successor. This announcement comes after PayPal disclosed his retirement plans in February, as part of their succession planning. The company remains confident in the internal talent pool to find the next capable leader.
In conclusion, while PayPal faced disappointment from investors due to its quarterly operating margin, CEO Dan Schulman highlighted the positive aspects, including the expectation of rebounding e-commerce growth and resilient consumer spending. PayPal’s strong payment volume and optimistic revenue outlook indicate a solid foundation for future success. Furthermore, the ongoing succession planning shows the company’s commitment to smooth leadership transition. With these factors in mind, PayPal remains well-positioned to navigate through the challenges and capitalize on the opportunities in the evolving payments landscape.
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