PayPal stock (NASDAQ:PYPL) experienced a 7% decline during extended trading on Wednesday, as investors expressed disappointment over the payments firm’s quarterly operating margin. Despite this setback, company executives expressed optimism, predicting improvements towards the end of the year.
The concerning margins at PayPal Holdings (NASDAQ:PYPL) have been a cause for worry among analysts in recent quarters. While the company’s low-margin business products have witnessed substantial growth, its branded products have faced a slowdown due to increased competition from rivals like Apple (NASDAQ:AAPL).
Acting CFO Gabrielle Rabinovitch addressed the issue on a call with analysts, stating that transaction margin performance may continue to face pressure in Q3 but is expected to improve in Q4. The adjusted operating margin for the quarter stood at 21.4%, missing the company’s forecast of 22%.
On a positive note, PayPal’s CEO, Dan Schulman, highlighted that with the cooling of inflation, the company foresees a rebound in discretionary spending, which will subsequently drive e-commerce growth. Schulman emphasized that e-commerce growth, which had previously slowed down, is now picking up momentum again.
In the second quarter, PayPal’s total payment volume saw a substantial increase of 11%, reaching $376.5 billion, benefiting from resilient consumer spending trends. This growth in total payment volume above consensus reaffirms the theme of strong consumer spending in the face of broader macroeconomic uncertainty, as pointed out by Kevin Kennedy, an analyst at research firm Third Bridge.
Based on the continued steady usage of its platform, PayPal (NASDAQ:PYPL) expects third-quarter revenue to reach approximately $7.4 billion, exceeding analysts’ estimates of $7.32 billion, according to Refinitiv data. Additionally, the company forecasts an adjusted profit per share for the current quarter within the range of $1.22 and $1.24, surpassing analysts’ expectations of $1.22.
During the second quarter, PayPal (NASDAQ:PYPL) recorded revenue of $7.3 billion, compared with $6.8 billion the previous year. The adjusted earnings per share of $1.16 aligned with Wall Street’s predictions.
Furthermore, Schulman disclosed that the company is in the final stages of selecting his successor, following the announcement of his retirement by PayPal in February.
Featured Image: Unsplash @ Muhammad Asyfaul
Author Faith Yakubu 
