PayPal Q3 earnings yield optimistic tone amid the holiday season

PayPal Holdings (NASDAQ: PYPL) rallied by 2.93% in early Thursday trade as investors digested the Q3’23 earnings released in the previous session. Notably, its earnings and revenue exceeded Wall Street estimates. Even so, its Q4 adjusted EPS’ expectations at $1.36 per share were lower than the analysts’ estimates of $1.40 a share.

The firm’s Q3 adjusted EPS of $1.30 was higher than the $1.23 consensus. Besides, it rose from Q2’s $1.16. It also raised its forecast for its full-year adjusted profit from $4.95 to $4.98 . This is above the analysts’ estimates of $4.92. Overall, the leaders exuded a rather optimistic tone for the firm’s long-term growth strategy.

Consumer spending has been steady throughout the year. This has in turn yielded an upbeat outlook for PayPal as the world enters into the festivities mood.

PayPal’s CEO, Alex Chriss reiterated that the firm is working on a comprehensive plan for the coming year. He further noted, “We have opportunities to accelerate our revenue growth while reducing our expenses, helping further drive operating leverage.”

At the same time, the firm has named Jamie Miller as its chief financial officer (CFO) as from 6thNovember. Miller, who has been the Global CFO at EY, succeeds Gabrielle Rabinovitch.

Even with the upbeat earnings report, analysts are still keen on the company’s margins, which have been rather underwhelming in recent quarters. Its low-margin business products have exhibited strong growth. Furthermore, its branded products have been subject to slow growth amid heightened pressure from PayPal’s competitors like Apple.

The payments giant further lowered its yearly forecast for the adjusted operating margin expansion from 100 basis points to 75 basis points. In Q3’23, its adjusted operating margin stood at 22.2%. It expects its adjusted operating margin to contract in Q4 on a year-on-year basis.