PayPal (PYPL) is scheduled to report results of its first fiscal quarter after market close on April 24, with a conference call scheduled for 5:00 pm EDT. What to watch for: 1. OUTLOOK: During the company’s last earnings call, PayPal said it sees fiscal year 2019 earnings per share between $2.84-$2.91 and revenue of $17.85B-$18.10B, with consensus at $2.88 and $18.04B, respectively. The company also said it expects first quarter earnings per share of 66c-68c and revenue between $4.08B-$4.13B. 2. INSTAGRAM PARTNERSHIP: On March 19, PayPal announced that it was partnering with Facebook’s (FB) Instagram to help power checkout on Instagram. The company said, “This new experience will enable shoppers to check out faster with PayPal & merchants to sell their products directly on Instagram.” It added that, “Shoppers will be able to securely store their preferred payment type, including PayPal, for faster checkout on future purchases. Shoppers can also use the Instagram app to view their order status, estimated delivery date and tracking number, as well as cancel orders, initiate a return, or request additional support.” 3. LIMITED BEAT-AND-RAISE POTENTIAL: Last week, UBS analyst Eric Wasserstrom downgraded PayPal to Neutral from Buy as he contended that its Venmo app leads and monetization are already priced into the stock, leaving little for earnings upside. The analyst told investors in a research note that his analysis of PayPal’s core operations indicates “limited beat-and-raise potential” over the next two years and said his “bull scenario” for Venmo monetization would only add 2% to his current 2020 earnings estimates. While Venmo maintains a leading competitive position in people-to-people payments, Wasserstrom argued that this competitive position will translate into “limited” revenue and net income contribution over the next two years. Further, the analyst said he sees limited valuation upside in shares of PayPal at current levels. 4. VENMO MONETIZATION, NEW PARTNERSHIPS: Reiterating an Overweight rating on the shares, KeyBanc analyst Josh Beck raised his price target for PayPal to $115 from $110 ahead of quarterly results. The analyst acknowledged that expectations are fairly high following a positive Venmo update last quarter, but while he expects TPV headwinds to persist, Beck sees room for credit-driven OVAS to offset. Overall, the analyst said he remains optimistic on the potential for Venmo monetization, new marketplace agreements, and partnerships to offset the eBay (EBAY) transition. 5. INSTANT TRANSFER: Last month, PayPal announced it was rolling out Instant Transfer to bank to U.S. consumers. In a blog post, PayPal’s Bill Ready stated that, “We’re beginning to roll out Instant Transfer to bank to consumers in the U.S. now and we expect to roll this out for businesses in the U.S. in the coming weeks, with international expansion expected in the near future. We’re able to offer this functionality to our customers following our expanded partnership with JPMorgan Chase (JPM). Through this partnership, PayPal is able to access the Real Time Payments network from The Clearing House, and enable Instant Transfer to bank.”
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