PayPal Reports Earnings Wednesday. Here’s What to Expect.

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The payments industry has become a crowded space with Apple. Block, and others chipping away at PayPal’s business.

Once a darling of the payments space, PayPal has seen its fortunes change drastically over the last two years, with shares losing more than three quarters of their value over that time.

In recent quarters, PayPal has had to contend with weakening margins. Its unbranded payment-processing business, Braintree, has been growing steadily, but is a lower margin business. Meanwhile growth in the company’s so-called branded business—familiar to most people as the PayPal checkout button—has been weaker.

While Wall Street will obviously be focused on PayPal’s earnings, the outlook will be more important. PayPal’s new CEO Alex Chriss, a former Intuit executive, stepped into the role last month and investors will be eager to hear his vision for the company. Some investors “are of the view that, despite attractive valuation, it’s hard to see a path to improving fundamentals without substantially greater investment over a longer period, which could result in meaningful downward EPS estimate revisions that makes valuation less attractive,” James Faucette, analyst at Morgan Stanley, wrote Monday.

 

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