PayPal (PYPL) is scheduled to announce Q1 earnings results today after market close. Going into the print the Street is looking for EPS of $0.75 (-3.8% Y/Y) and revenue of $4.72B (+14.3% Y/Y).
However, RBC Capital analyst Daniel Perlin believes these estimates may prove too optimistic. “Based on our prior work and what we learned intra-quarter, we believe there is downside risk to both our and the Street’s revenue and EPS estimates given the evolving impacts from COVID-19” he writes.
The analyst has a buy rating on the stock with a $120 price target- indicating that shares could pullback by just over 4%. He is expecting revenue of $4,758M, EPS of $0.76, and EBITDA of $1,262M. That’s alongside TPV (total payment volume) of $192,418M- significantly below the Street’s expected $196,369M.
“We are forecasting TPV of ~$192B (19% y/y growth), a slight deceleration from the year- ago quarter, as we expect impacts from COVID-19 began showing up in its business in mid-late March” the analyst explains.
While datapoints suggest e-commerce sales have held up the most, Perlin nonetheless sees a downward bias in the data as efforts to maintain social distancing put downward pressure on consumption and peer-to-peer payments.
Looking forward, Perlin believes the largest effects will materialize next quarter (Q2/20).
What’s more, the stock has already rallied 16% year-to-date, significantly outperforming the S&P 500 which is down 11% over the same period. Given this recent rally as well as Covid-19-related risks, Perlin concludes “we believe the setup into the print skews negative.”
Overall, PYPL scores a bullish Strong Buy Street consensus, with 15 recent buy ratings vs just 3 hold ratings. Meanwhile the $129 average analyst price target indicates upside potential of just over 2.5%. (See PayPal stock analysis on TipRanks).
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