What happened
Shares of PayPal (PYPL 1.96%) were decidedly higher Friday, jumping as much as 5.6%. As of 10:45 a.m. ET, the stock was still up 4.5%, despite the market trending lower.
The catalyst that sent fintech specialist higher was the company's financial report, which showed significant progress in its ongoing turnaround.
So what
PayPal ended 2022 on a high note. For the fourth quarter, revenue of $7.4 billion grew 7% year over year, and 9% excluding the impact of foreign currency exchange headwinds. This resulted in adjusted earnings per share (EPS) of $1.24, which climbed 11%.
To put this in context, analysts' consensus estimates had forecast revenue of $7.4 billion and EPS of $1.20. Given the recent economic challenges, investors breathed a sigh of relief, pushing the stock higher.
The results were driven by total payment volume (TPV) of $357.4 billion, up 5% year over year and 9% in constant currency. Given the strong dollar, foreign currencies are worth less when converted to dollars on the financial statements, in turn weighing on certain financial metrics. The number of payment transactions grew to 6 billion, up 13%. Venmo TPV grew 3% to $62.5 billion.
PayPal added 2.9 million net new active accounts, up 2% year over year, bringing the total to 435 million. Perhaps more importantly, payment transactions per active account climbed to 51.4 over the trailing-12-month period, up 13%, showing PayPal's plan to increase activity among existing users is working.
Now what
For fiscal 2023, PayPal is forecasting solid growth in profits, driven by the company's previously announced cost-cutting measures, with adjusted EPS growing 18% to $4.87.
The biggest headline was news that CEO Dan Schulman plans to retire by the end of 2023. The chief executive ushered PayPal through its high-profile spinoff from eBay and successfully navigated a period of impressive growth during the pandemic. The board of directors has initiated a search for a successor and Schulman will be around to ensure a "smooth leadership transition."
PayPal stock is still selling near its lowest-ever valuation, trading at just 2.7 times next year's sales. Considering its impressive progress and cheap price tag, PayPal stock is still a buy.
