PayPal stock surged in the pre-market trading after the company made an upward revision to its full-year adjusted profit forecast. This move comes as the payments giant banks on robust consumer spending trends, with the pivotal holiday shopping season just around the corner.
Consumer spending has demonstrated exceptional resilience throughout the year, and analysts anticipate this enthusiasm to extend into the holiday season, as companies are enticing inflation-weary shoppers with steep discounts on various products, from electronics to clothing.
The U.S. holiday season, which includes highly-anticipated shopping events like Cyber Monday, Thanksgiving, and Black Friday, is expected to witness a 4.8% year-on-year surge in online sales, as reported by Adobe Analytics in October.
PayPal Holdings, Inc. (NASDAQ: PYPL) expects its full-year adjusted profit to reach about $4.98 per share, an uptick from the earlier estimate of $4.95. Wall Street analysts had been anticipating $4.92, as per LSEG data.
Analysts, however, are keeping a close watch on PayPal’s margins, which have left investors underwhelmed in recent quarters. The company’s low-margin business products continue to experience robust growth, while its branded offerings have seen a slowdown owing to intensifying competition, notably from tech behemoth Apple.
PayPal has made a slight adjustment in its annual forecast for adjusted operating margin expansion, reducing it from the initial projection of 100 basis points to 75 basis points. The company posted an adjusted operating margin of 22.2% for the third quarter.
PayPal’s revenue surged by 9% to reach $7.4 billion on an FX-neutral basis in the third quarter ended September 30. Analysts, on average, had anticipated a slightly lower figure at $7.38 billion.
U.S. consumer spending saw a remarkable upswing in September, fueled by increased purchases of motor vehicles and travel expenditures, sustaining strong spending momentum as the fourth quarter approaches, according to the U.S. Commerce Department’s data.
The total payments volume soared by 13% on an FX-neutral basis, reaching $387.7 billion in the third quarter, outperforming Street expectations of $377.9 billion.
PayPal achieved adjusted earnings per share of $1.30 in the third quarter, beating Wall Street expectations, which were set at $1.23 per share.
PayPal stock is trading at $55.38 as of writing, marking a 7.20% increase over the last trading session.
Kevin Putnam is a financial journalist and editor based in New York. He specializes in editing news and analysis related to U.S. stock market.
