PayPal Holdings, Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next
As you might know, PayPal Holdings, Inc. (NASDAQ:PYPL) recently reported its quarterly numbers. It looks like a credible result overall – although revenues of US$5.5b were what the analysts expected, PayPal Holdings surprised by delivering a (statutory) profit of US$0.86 per share, an impressive 48% above what was forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
See our latest analysis for PayPal Holdings
Following the latest results, PayPal Holdings’ 40 analysts are now forecasting revenues of US$25.5b in 2021. This would be a major 33% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 45% to US$3.19. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$25.5b and earnings per share (EPS) of US$3.15 in 2021. The consensus analysts don’t seem to have seen anything in these results that would have changed their view on the business, given there’s been no major change to their estimates.
The analysts reconfirmed their price target of US$221, showing that the business is executing well and in line with expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. Currently, the most bullish analyst values PayPal Holdings at US$290 per share, while the most bearish prices it at US$110. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the PayPal Holdings’ past performance and to peers in the same industry. It’s clear from the latest estimates that PayPal Holdings’ rate of growth is expected to accelerate meaningfully, with the forecast 33% revenue growth noticeably faster than its historical growth of 16%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 13% next year. Factoring in the forecast acceleration in revenue, it’s pretty clear that PayPal Holdings is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that there’s been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn’t be too quick to come to a conclusion on PayPal Holdings. Long-term earnings power is much more important than next year’s profits. We have estimates – from multiple PayPal Holdings analysts – going out to 2024, and you can see them free on our platform here.
You still need to take note of risks, for example – PayPal Holdings has 2 warning signs we think you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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