PayPal (PYPL.US) stock jumped 13.0% in premarket after the financial services company posted better than expected second quarter results. Also news that Elliott Management Corp. confirmed a $2 billion stake in the company supported bullish sentiment.
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Company earned 93 cents per share, down 19% from a year earlier, however it topped Refinitive analysts’ projections of 86 cents per share.
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Revenue rose 9.0% to $6.81 billion and slightly beat market estimates of $6.79 billion.
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Operating cash flow in the quarter came in at $1.5 billion and free cash flow at $1.3 billion, up 12% and 22% YoY, respectively. Total payment volume increased 9%, to $339.8 billion.
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Number of active accounts rose 6% to 429 million YoY, however failed to match Wall Street expectations of 432.8 million.
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“Our second-quarter results were solid with currency-neutral revenue and non-GAAP earnings growth exceeding expectations,” PayPal President and Chief Executive Officer Dan Schulman said in the earnings release. “We continue to gain share as we execute across our key strategic initiatives, even as we drive operational efficiency across our business.”
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On the flip side, PayPal recorded $341 million net loss, compared with a $1.18 billion profit during the year-earlier period.
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Paypal added $15 billion to its stock repurchase program and authorized cost-savings program.
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Company reported significant progress in terms of capital efficiency and expects to reduce costs by $900 million in 2022 and save a minimum of $1.3 billion next year.
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Company confirmed that Elliott Management has taken a strategic stake in the company. Elliott, well-known as an activist fund, now holds a $2 billion stake in PayPal and is a key driver in PayPal’s cost-savings program.
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PayPal said it has a “commitment to work with Elliott Investment Management on a comprehensive evaluation of capital return alternatives”.
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In turn Elliott Managing Partner Jesse Cohn said "PayPal has an unmatched and industry-leading footprint across its payments businesses and a right to win over the near and long term."
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Morgan Stanley increased price target to $134 from $129 as latest quarterly figures “should help improve narrative”.
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Above news overshadowed muted financial outlook. For the current quarter, PayPal forecasts an adjusted profit of 94 to 96 cents a share, in line with estimates. However, expected revenue of $6.8 billion stands below analysts' estimates of $7.02 billion. It is worrisome taking into account that following the recent sell-off, the majority of analysts lowered their expectations for second and third quarters.
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For the full fiscal year, the company expects profit in the region of $3.87 to $3.97 per share on revenue of $1.4 trillion.
PayPal (PYPL.US) stock rose sharply in premarket and is currently testing a major resistance zone at $101.00, which is marked by the upper limit of the 1:1 structure. Should a break higher occur, upward move may accelerate towards next resistance at $123.90 which coincides with 23.6% Fibonacci retracement of the last downward wave. On the other hand, if sellers manage to regain control, another downward impulse towards support at $81.60 may be launched. Source: xStation5
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