PayPal Earnings Jump. The Stock Is Breaking Out.

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The digital payments firm reported earnings before the market open, not after the close as usual.

The new accounting includes the impact of stock-based compensation expense and related employer payroll taxes. PayPal said it has recast adjusted financial results for 2023, 2022 and 2021 to reflect the accounting change.

Under the new reporting method, PayPal earnings for the March quarter rose 27% to $1.08 per share on an adjusted basis. Revenue climbed 9% to $7.7 billion.

Analysts polled by FactSet expected PayPal earnings of $1.22 a share on revenue of $7.515 billion.

"Absent the adjustments made to operating expenses for SBC, adjusted EPS would have been $1.40, 15% ahead of consensus estimates of $1.22," said Evercore ISI analyst David Togut in a report.

PayPal Stock 2024 Guidance

PayPal also updated 2024 guidance. The company forecast adjusted EPS growth of "mid to high single-digit percentage" from $3.83 in the prior year based on the new reporting method.

Under the prior reporting method, PayPal had forecast flat EPS growth in 2024.

"Q1 has 2024 off to a good start," said Susquehanna analyst James Friedman in a report. "We continue to note the increased intensity and coherent strategy coming from PayPal's new management."

New CEO Alex Chriss took the helm in late September. He's been making big changes.

"We also see substantial need for continued retooling of the company, how we work with our customers and how we execute," Chriss said on the earnings call with analysts.

He added: "We are encouraged by the progress to date but remain realistic that we still have a lot of work to do and a lot of opportunity to drive profitable growth ahead of us. This is a transition year where we are focused on execution and making critical choices that will set the business up for long-term success. We have a plan that will return this company to where it needs to be and remain focused on execution to get there."

Key Financial Metrics Beat

In Q1, total payment volume processed from merchant customers in the quarter climbed 14% to $403.9 billion. Analysts had projected total payment volume of $393.64 billion.

Further, PayPal's active accounts rose 1 million to 427 million from the previous quarter, the first sequential growth since late 2022.

"PayPal's Q1 featured a bigger beat than anticipated on key metrics," said Bank of America analyst Jason Kupferberg in a report. "Transaction profit revenue growth of 4% vs. Street at zero growth is the biggest highlight."

Meanwhile, PayPal repurchased $1.5 billion of its own shares in Q1. It plans at least $5 billion in 2024 buybacks overall.

The 2024 guidance includes Q1 restructuring charges of $175 million and an estimated $70 million to $90 million in Q2.

Also, PayPal last year named a new chief financial officer: Jamie Miller, formerly CFO at consultancy EY.

San Jose, Calif.-based PayPal has evolved from an online checkout site to a mobile shopping and person-to-person payments site. Meanwhile, competition has heated up with Apple (AAPL), Square-parent Block (SQ) and others.

PayPal Stock Entry Point

On the stock market today, PayPal stock rose 1.4% to close at 67.92.

In addition, PYPL stock had an entry point of 68.21 heading into the PayPal earnings report.

Also, shares were up 9% in 2024 but down 12% over the past year.

SQ stock rose slightly, nearing its 50-day line. Square-parent Block is set to report on Thursday.

PayPal said it announced plans to change accounting methods on Feb. 7

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.

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