“We delivered a solid set of results in Q1 and I’m encouraged by the progress the team is making against PayPal’s go-forward strategy
and in strengthening our foundation.
2024 remains a transition year and we are focused on execution – driving our key strategic initiatives, realizing cost savings, and
reinvesting appropriately to position the company for consistent, high-quality profitable growth in the future.”
Alex Chriss
President and CEO
To check out my full PayPal Thesis – Follow this link
Overview
Very solid quarter in the bag for the team over at PayPal. Lot’s of data on show that just reinforces my thesis for this one. On top of that Alex actually did a MUCH better job with the Q/A. Offering clear answers, which much more detail.
You can find the full earnings deck release here.
You can find the financial reports here.
Highlights
•Revenue UP 9% to $7.7b
•GAAP EPS UP 18% to $.83
•Non-GAAP EPS UP 27% to $1.08
•$1.5b (faster rate than $5b) buybacks executed Q1.
Updated Vizual Summary Charts
Lots of good stuff in this first slides to see. The things I love the most:
• Outstanding shares are getting burned down.
• Debt is coming down slowly but consistently.
• Cash continues to grow at a steady clip.
• Operating expenses remain low.
• Transaction margins are holding steady, but would still like an inflection here. Up 4% YoY though, which I do like.
• Transactions are moving steadily in the right direction.
Total payment volume up 14% YoY is nice icing on the cake too.
Key Charts
These slides are a bit more of a mixed bag, so here’s what I like:
• Transactions per active account continue to grow slowly. Up nicely 13% YoY.
• Transactions (Excluding PSP) also continue to trend up slowly. Up 7% YoY.
• Operating leverage continues to improve, with rev outpacing expenses.
Here’s what I like less:
• Take rate is still flat. I’m happy it’s not falling though.
• Payment transactions are down, but this is something we see consistently in Q1. Up 11% YoY.
• Transactions per account also follows the above trend.
Guidance
Nothing to complain about here with estimates…
We can take a more detailed look at guidance on the earnings deck though.
Lower guides than historically, but we do have the inclusion of some one off benefits in those comps. So if we discount them, it’s pretty inline. I still think we are getting conservative numbers here.
Another thing to look at is buybacks. PayPal have returned $1.5 billion to stockholders by repurchasing approximately 25 million shares of common stock. That brings the current amount to $5.1 billion – 81 million shares. They also plan to carry on buying back more, ear marking at least another $5 billion. I LOVE this.
Activity
This data is a little out of data but still a nice signal. Insiders continue to load up on this and short interest remains very low at just over 2%. The one thing that doesn’t thrill me here is that the institutions have been trimming there positions for a while. You can see a more detail view of this below, where we can see some potential for a turn around.
Balance Sheet
Not much to complain about when we take a look at the balance sheet either.
A Minor Blemish
Nearly every metric showed growth YoY but there’s one that didn’t, and I don’t care about it either. eBay has had it’s time in the sun and its market share has been eaten by companies like Amazon and Vinted.
The Charts
It’s been a somewhat unfortunate time to release earnings for PayPal. We had some bad economic data today with employment costs being higher than expected and tomorrow with have a Fed rate decision and more key data. The result is a broad market sell off. Not the best time to release earnings, but we are green!
Price did make a good attempt at closing the gap to the upside, which is the red box on the chart. Once it failed it has come back down to fill the gap it created when it opened this morning. Which at least takes that off the table in the future.
Overall the price action has been a little disappointing, I was hoping we would get above the gap and turn it into support. Price now looks like it wants to turn this volume shelf into support. Still looking bullish to me though.
Was It A Beat?
There seems to be some confusion if PayPal beat on EPS or not. This stems from an accounting change they announced back in Feb that was done to increase transparency and include SBC. They did in actual fact have a beat on EPS.
Conclusion
My thesis remains intact and I’m still happy with my plan for PayPal. Fundamentally they have improved and I’m still confident this stock gets where I want it to over the next year.
