PayPal Inc. (NASDAQ:PYPL) revised its full-year adjusted profit outlook upward on Tuesday, benefiting from robust consumer spending and enhanced operating margins in the first quarter.
Despite lingering economic concerns, consumer spending has displayed remarkable resilience, particularly in online shopping, dining out, and travel, fueling optimism in the payments industry. While lower-income segments have tightened discretionary spending, the majority of Americans continue to engage in these activities.
In a bid to restore investor confidence, PayPal’s newly appointed management is aggressively pursuing initiatives to streamline operations and reduce costs. Earlier this year, the company announced plans to slash approximately 2,500 jobs, constituting 9% of its global workforce, aiming to alleviate pressure on its stock, which underperformed on the Nasdaq exchange last year.
CEO Alex Chriss emphasized, “2024 remains a transition year, and we are focused on execution—advancing our key strategic initiatives, achieving cost-savings, and reinvesting prudently.”
The company anticipates a “mid-to-high single-digit percentage” increase in adjusted profit for 2024, contrasting with its previous projection of a flat performance. Additionally, PayPal forecasts a 7% growth in second-quarter revenue on a currency-neutral basis, aligning largely with analyst expectations.
During the first quarter, total payment volumes surged by 14% to $403.9 billion, while net revenue climbed by 10% to $7.7 billion on a currency-neutral basis. PayPal’s robust payment volumes mirror the quarterly performances of traditional card-based payments processors such as Visa Inc. (NYSE:V) and American Express Company (NYSE:AXP).
Operating margins for PayPal improved by 84 basis points to 18.2% in the first quarter, on an adjusted basis, addressing investor concerns stemming from sluggish growth post-pandemic. Notably, the company’s low-margin business products experienced significant growth, offsetting deceleration in its branded products due to heightened competition from rivals like Apple Inc. (NASDAQ:AAPL).
Adjusted earnings per share for PayPal rose to $1.08 in the quarter ended March 31, compared to 85 cents in the corresponding period last year.
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