Fly Intel: What to watch in PayPal earnings report

PayPal (PYPL) is scheduled to report results of its second fiscal quarter after market close on July 28, with a conference call scheduled for 5:00 pm EDT. What to watch for: 1. OUTLOOK: During the company's last earnings call, PayPal said it sees second quarter adjusted earnings per share of $1.12, with consensus $1.13, and revenue to grow about 19% at current spot rates and 17% on an FXN basis to $6.25B, with consensus at $6.27B. The company also said it expects full year 2021 adjusted earnings per share of $4.70 and revenue of $25.75B, with consensus at $4.73 and $25.88B, respectively. Additionally, PayPal expects to add NNAs in the range of 52M-55M and TPV growth to be about 30% on a spot and FXN basis. 2. MODEST UPSIDE EXPECTED: Barclays analyst Ramsey El-Assal raised the firm's price target on PayPal to $343 from $318 ahead of quarterly results, while keeping an Overweight rating on the shares. The analyst expects "modest upside" to second quarter estimates. Leading indicators show e-commerce growth decreased sequentially but "remained healthy" in the second quarter, largely in-line with company guidance, El-Assal told investors in a research note. Further, he believes PayPal's fundamentals are "still strong." 3. CRYPTOCURRENCY: Jose Fernandez da Ponte, VP & GM, Blockchain, Crypto and Digital Currencies at PayPal, said in a post to the company's site that, "As part of our efforts to meet the ever-changing needs of our customers, we are pleased to announce that we have recently raised the purchase limits of cryptocurrency for eligible PayPal customers in the U.S. to $100,000 per week with no annual purchase limit. These changes will enable our customers to have more choice and flexibility in purchasing cryptocurrency on our platform." 4. CHANGES TO U.S. RATES: PayPal announced on its website last month that it is making changes to its published rates in the United States "to better align our pricing with the value that our products and services provide." "These rates will apply to a portion of our merchant customers in the U.S. beginning August 2, 2021. For PayPal digital payment products, which include Seller Protection on eligible transactions, the rate for online transactions will be 3.49% + $0.491 per transaction. For PayPal and Venmo QR code transactions in person over $10, the rate will be 1.90% + $0.10, and for such transactions $10 and under, the rate will be 2.40% + $0.05. For certain in-person debit and credit transactions the rate will be 2.29% + $0.09. Online credit and debit card transactions will be 2.59% + $0.491 per transaction without Chargeback Protection, or 2.99% + $0.49 with Chargeback Protection. Fees for charity transactions will be 1.99% + $0.49 for confirmed charities. For U.S. merchants who have custom, non-standard pricing, rates will remain unchanged for those services as agreed. Commenting on the news, Barclays analyst Ramsey El-Assal said his analysis suggests the changes could potentially result in 3% revenue upside in 2022, and 10% to earnings, depending on reinvestment levels. Meanwhile, his peer at Bank of America argued that the price hike could contribute about 2% to PayPal's 2022 revenue, but the benefit is already included in the company's guidance for this year and beyond. Analyst Jason Kupferberg added, however, that given the churn potential, pricing changes are also reflective of PayPal's "very strong competitive position."