On the pre-market trading of July 30th, PayPal (PYPL.US), a digital payment service provider, announced its latest financial report and performance outlook. The company raised its adjusted profit expectations for the second time this year and bet on strong consumer spending during the back-to-school and upcoming holiday shopping season.
It was learned from the Intelligent Financial News APP that PayPal (PYPL.US), a digital payment service provider, announced its latest financial report and performance outlook before the US stock market on the morning of July 30th, betting on a strong consumer spending scale during the back-to-school and upcoming holiday shopping season. At the same time, PayPal's various cost-cutting measures have significantly improved the company's profit margin. The stock price of this American payment giant surged more than 9% in pre-market trading after the earnings announcement.
Despite the fact that US interest rates have long been around historical highs since the Fed began its aggressive rate hike cycle in 2022, US consumers remain very resilient and their consumption is remarkably tough. Although many competitors in the payment industry have expressed strong concerns about the pressure facing low-income people, the trading volume in this industry has remained relatively stable this year.
Meanwhile, under the leadership of PayPal CEO Alex Krys, the company has focused on increasing its operating margin through restructuring, substantial cost cutting, and reducing the number of employees. In January, the company announced plans to lay off approximately 2,500 people, or 9% of its global workforce.
PayPal now expects its Non-GAAP adjusted earnings per share growth rate to reach between "15% to 17%" by 2024, while the earnings per share growth forecast disclosed in the April report is a growth rate in the "high single digits".
In terms of PayPal's second-quarter financial report, within the three months ended June 30th, PayPal's Non-GAAP adjusted earnings per share increased to $1.19, up from 87 cents in the same period last year.
In the second quarter, the total payment volume (TPV) of all PayPal platforms increased by 11% to $416.81 billion, while PayPal's total net revenue, on a foreign-exchange-neutral basis, increased by 9% year-on-year to $7.89 billion. Among them, the quarterly TPV is a key indicator of its core transaction business profitability, which fell to a low point after experiencing the darkest moment of rising interest rates in 2022 but has rebounded steadily since 2023.
The operating margin indicator that the market is most concerned about, PayPal's operating margin, has been through fire and rebirth. With a growth of 231 basis points on an adjusted basis, the Non-GAAP adjusted operating margin in the second quarter reached 18.5%. After the performance growth slowed significantly after the outbreak of the COVID-19 pandemic, PayPal's Non-GAAP operating margin has been a key performance indicator that investors have focused on over the past year, and has long been in a downward trend since 2022. Therefore, achieving an expanding profit margin will undoubtedly greatly boost the confidence of PayPal shareholders and numerous individual investors.
In the second quarter, the total payment volume of the major brands on the PayPal platform increased by about 6%, significantly alleviating investors' concerns. PayPal stated that since 2021, the business of brand direct settlement mode and brand type business Braintree and Venmo together has contributed to the highest-scale transaction business profit growth rate. The profit of PayPal's transaction business in the second quarter increased by 8% year-on-year to approximately $3.61 billion.
In recent years, technology giants such as Apple (AAPL.US) and Google parent Alphabet (GOOGL.US) have entered the digital payment field one after another, intensifying market competition and to some extent damaging PayPal's market share.
Therefore, although PayPal's non-brand business has continued to grow in recent years, the weakness of its brand-type business (such as Venmo) has put enormous selling pressure on PayPal's stock price.
Shortly after being appointed CEO last year, Krys said he wanted to increase the scale of revenue outside of purely transaction-related revenue and promised to streamline financial technology products.
PayPal expects total revenue in the third quarter to grow by a "mid-single-digit percentage," according to data compiled by LSEG, lower than Wall Street analysts' expected growth rate of about 7.5%.