PayPal (NASDAQ:PYPL) has been on a solid run so far this year, up 20% compared to the broader market's 5% gain. Investors have high hopes that the company can continue its winning ways, following several announcements that it's expanding its ecosystem with the acquisition of a slew of complementary companies -- snatching up four companies in just five short weeks.
Investors will be looking for additional details when the company reports the financial results for its just-completed 2018 second quarter on Wednesday, July 25, after the market close. Let's review the company's recent results, as well as a few things that will be of interest to investors going into the earnings report.
Can its solid growth continue?
PayPal's first-quarter results were everything shareholders have come to expect from the payment processor. The company reported revenue of $3.69 billion, up 24% year over year -- and up 22% adjusting for foreign exchange rate differences. This exceeded the high end of the company's guidance and analysts' consensus estimates alike. Net income grew to $511 million, an increase of 33% compared to the prior-year quarter, generating adjusted earnings per share of $0.57, up 29% year over year.
For the second quarter, PayPal forecast revenue in a range of $3.78 billion to $3.83 billion, which would be year-over-year growth of 21.5% at the midpoint of its guidance, or 19.5% on a currency-neutral basis. The company is expecting adjusted earnings per share between $0.54 and $0.56, or growth between 17% and 22% compared to the prior-year quarter.
For their part, analysts are also expecting the growth to continue, with consensus estimates calling for revenue of $3.81 billion, which would be 21% growth year over year, and adjusted earnings per share of $0.56, up 22% compared to the year-ago quarter.
More than the top and bottom lines
As important as the revenue and profit metrics are, investors will be looking for additional signs that PayPal's growth trend remains intact. Last quarter, PayPal added 8.1 million new customer accounts, and with that net new actives increased 35% compared to the prior-year quarter. Not only was the company adding new customers, but engagement among existing customers increased. PayPal processed 34.7 payment transactions per account during the trailing-12-month period, an increase of 8% year over year. Investors should look to ensure that those numbers continue to climb.
Another item of interest will be the continuing integration of "Pay with Venmo" among merchants. PayPal has been rolling out a dedicated button that will allow consumers to use Venmo for retail purchases, and the company will almost certainly be providing an update on its progress.
Payment volume is another indicator of the company's ongoing success, topping $132 billion last quarter, up 32% compared to the year-ago quarter, and 27% on a constant currency basis. Keep an eye out for similar high growth on a comparative basis.
Finally, PayPal has been on a massive shopping spree. Since the last earnings announcement, the company has made the following acquisitions:
- European small-business payments platform iZettle
- Commerce-focused AI start-up Jetlore
- Online-payments distributor Hyperwallet
- Fraud prevention and risk management platform Simility
Additionally, in a recent interview, PayPal CEO Dan Schulman said the company had a healthy balance sheet and planned to invest up to $3 billion annually to complement its existing set of services. PayPal executives may expand on that theme on the conference call to discuss the results.
PayPal has been on a roll, and investors will be looking to ensure that it will be able to continue its upward trajectory. Expect for the company to provide plenty for shareholders to digest when the company reports earnings on Thursday.