PayPal Holdings (PYPL) stock is spiraling Tuesday after the payments giant reported mixed results for its third quarter and raised its full-year profit forecast.
In the three months ended September 30, PayPal's net revenue increased 5.8% year over year to $7.8 billion, driven in part by a 5.7% jump in payment transactions to 6.6 billion. Meanwhile, its earnings per share (EPS) were up 22.5% from the year-ago period to $1.20.
"PayPal delivered strong financial and operating results during a highly productive third quarter," said CEO Alex Chriss in a statement. "We are making solid progress in our transformation as we bring new innovations to market, forge important partnerships with leading commerce players, and drive awareness and engagement through new marketing campaigns."
The company's top and bottom-line results were mixed compared with analysts' expectations. Wall Street was anticipating revenue of $7.9 billion and earnings of $1.07 per share, according to Yahoo Finance.
PayPal's total payment volume increased 9% year-over-year to $422.6 billion in the quarter, driven by active accounts increasing 0.9% to 432 million and payment transactions per active account rising 8.5% to 61.4.
For the fourth quarter, PayPal said it anticipates low single-digit revenue growth and a low to mid-single digit decrease in earnings. And for the full year, it now anticipates earnings growth in the high teens, up from its previous forecast of low to mid-teens growth.
"We are raising our full year non-GAAP guidance and are pleased with the strength we are seeing across the business," Chriss said. "We've built a solid foundation in this last year that will serve us in the years to come."
Is PayPal stock a buy, sell or hold?
Heading into Tuesday's session, PayPal was up 36% for the year to date, easily beating the S&P 500's 23.5% total return (price change plus dividends). And most of Wall Street thinks the financial stock has more room to run.
According to S&P Global Market Intelligence, the average analyst target price for PYPL stock is $85.58, representing implied upside of roughly 10% to current levels. Additionally, the consensus recommendation is Buy.
But not everyone is all-in on the large-cap stock. Financial services firm Morgan Stanley has an Equal Weight rating (equivalent to a Hold) on PYPL with a $71 price target.
"PayPal's massive online acceptance lead and industry-low attrition can support growth that's in line with overall e-commerce," wrote Morgan Stanley analyst James Faucette in an October 24 note. "Improvements in operational efficiency along with ongoing share repurchases can also support low-teens EPS growth."
However, Faucette expresses concerns over PayPal's strategic direction, citing slow progress in improving Branded Checkout, doubts about Venmo's monetization potential among Gen Z and Gen Y shoppers, and uncertainty about the company's investment priorities and ability to execute key strategies.
