In other words, lower growth expectations for PYPL in the short term have resulted in the company's share price under-performing Square in the last three months. In contrast, the company expects a more moderate top line expansion of +20% and a lower non-GAAP earnings per share growth of +21% for full-year FY 2021. In other words, it appears that Work-From-Home tailwinds relating to COVID-19 are easing, and PayPal's growth is likely to moderate in the near-term.Īlso, according to S&P Capital IQ data, PayPal's revenue and non-GAAP adjusted earnings per share increased by +24% and +41% YoY, respectively. The company's number of net new active accounts declined by -21% QoQ from 14.5 million in Q1 2021 to 11.4 million in Q2 2021, which is even more significant than the -9% QoQ decrease in net new active accounts in the first quarter of this year. Furthermore, PayPal's expected Q3 2021 adjusted earnings per share of $1.07 was -6% short of the market consensus' earnings per share estimate of $1.14.Īpart from the weaker-than-expected Q3 2021 guidance, PYPL's net new active accounts decreased for the second consecutive quarter. PYPL guided for revenue of between $6.15 billion and $6.25 billion for the third quarter of 2021, which meant that the mid-point of the company's revenue guidance at $6.20 billion was -4% below the Wall Street analysts' consensus quarterly revenue estimates of $6.45 billion. PayPal's Q2 2021 non-GAAP adjusted earnings per share was +2.7% above market expectations, but the company's Q3 2021 guidance was disappointing. PayPal's last traded price of $272.96 as of Augrepresents a -10% correction in the past one month. PayPal Holdings reported its Q2 2021 financial results on Jafter trading hours, and the company's stock price declined by -6% from $301.98 as of Jto $283.17 as of Jpost-results announcement. I will focus on the latter in this section of the article, and elaborate on the former in the next section. The divergence in the share price performance of PayPal and Square in the past three months is due to both the market's assessment of the potential impact of the Afterpay acquisition on PayPal, and PayPal's below-expectations Q3 2021 guidance. However, there has been a complete reversal in the last three months, as Square's stock price rose by +32%, while PayPal's share price only increased by +8% over the same period. In the past six months, the respective share price performance of PayPal and Square have been similar, with PayPal's and Square's shares down by -1.2% and -1.9%, respectively. PayPal calls itself "a leading technology platform and digital payments company that enables digital and mobile payments on behalf of merchants and consumers worldwide" in the company's most recent Q2 2021 10-Q filing. Although PYPL's revenue growth is likely to slow in 2H 2021, the company's full-year FY 2021 and FY 2022 top line expansion should still be much better than most of its peers. I view Square's and PayPal's shares as fairly valued, given that their rich P/E multiples are supported to a certain degree by the positive growth outlook for both companies. Square's shares also did better than PayPal stock in the last three months, because its proposed acquisition of Afterpay was seen as a potential boost to its future growth prospects. PayPal's growth is expected to slow in 2H 2021, which partly explains why its share price performance was inferior to that of Square in the past three months. #PAYPAL STOCK PRICE UPDATE#In this current article, I will explain why the respective share price performance of PayPal and Square have diverged in recent months, and also provide an update on Square's recent proposed acquisition of Afterpay Limited ( OTCPK:AFTPF) ( OTCPK:AFTPY). In my article about Square written almost a month ago, I discussed about the competition between Square and PayPal's Venmo. SQ's shares are up +70% in the last one year. Between the two, Square is the better Buy assuming its valuations come down to more reasonable levels i.e. Martin-dm/E+ via Getty Images Elevator Pitch
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