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PayPal Q1 Earnings Exceed Expectations, but Stock Dips as 2023 Outlook Raises Questions

PayPal (PYPL) announced its first-quarter earnings on Monday, revealing better-than-expected figures for earnings, revenue, and total payment volume. However, PayPal’s stock took a hit as analysts contemplated the implications of the company’s increased 2023 outlook.

For the quarter ending March 31, PayPal’s earnings grew by 33% compared to the previous year, reaching $1.17 per share. The digital payments giant reported a 9% increase in revenue to $7.04 billion, exceeding estimates by approximately 1%.

Analysts had predicted PayPal’s earnings to be at $1.10 per share with a revenue of $6.98 billion. In comparison, the company’s earnings were 88 cents per share on revenue of $6.48 billion in the same period last year.

The total payment volume processed from merchant customers increased by 10% to $354.5 billion, surpassing analysts’ projections of $344.8 billion.

PayPal also revised its 2023 earnings outlook, forecasting an adjusted earnings growth of about 20% to $4.95 per share, which includes the first-quarter beat. The previous estimate had been a 19% growth rate of around $4.87 per share.

Jefferies analyst Trevor Williams commented on the mixed nature of PayPal’s guidance in a note to clients, stating, “Fiscal year EPS raised on the outlook for higher revenue as margin outlook was lowered.”

PayPal stock fell 3.1% to nearly 73 in extended trading.

As competition intensifies with rivals like Square-parent Block (SQ), PayPal has transitioned from an online checkout site to a mobile shopping and person-to-person payment platform.

PayPal stock has seen a 5% increase in 2023 so far, following a 62% plunge in 2022. The company also announced a $15 billion share buyback program in August and revealed plans to cut 2,000 jobs, or about 7% of its workforce, in January.

Despite these changes, PayPal stock has yet to recover from its all-time high of 310.16 in July 2021, with a current Relative Strength Rating of only 43 out of a possible 99, according to IBD Stock Checkup.