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Block, PayPal Q3 earnings to shed more light on consumer spending, BNPL (NASDAQ:PYPL)


Third-party payment apps

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Two major payment technology companies, Block (NYSE:SQ) and PayPal (NASDAQ:PYPL), which will release its third-quarter earnings after the close on Thursday, offering a prism of consumer spending patterns.

If traditional payment networks are any indication, both companies have a good chance topped Wall Street expectations. Passport (DRAW) and Master Card (GHOST) saw their quarterly earnings beat estimates as consumer spending remained steady. Most credit card companies, which have announced their earnings, show an increase in borrowing. And Bank of America (BAC) data shows a 10% increase in general consumer payments in September, exceeded the rate of inflation.

PayPal (PYPL) are expected to earn $0.96 per share, the top end of the $0.94-$0.96 guidance range the company issued in August. Wall Street’s median revenue estimate is $6.82 billion in revenue, well above $6.81 billion in revenue it recorded in Q2 and higher than its guidance of $6.80 billion. The company’s adjusted EPS missed the only consensus estimate twice out of the last 12 quarters.

Bank of America analyst Jason Kupferberg sees potential for PYPL’s Q3 EPS to reach consensus due to increased focus on cost control and activist participation from Elliott Management. BofA added its US1 lis stockt in September.

Block’s (SQ) Q3 EPS is expected come for $0.23, up from $0.18 in Q2. Average revenue estimates are $4.47 billion, up from $4.40 billion it posted last quarter. Companies have missed the EPS consensus four times in the past 12 quarters.

For both companies, investors will be interested in the performance of Buy Now, Pay Later units in terms of whether consumers are increasing use of installment plans and companies are facing face stiff competition. Additionally, rising interest rates are pushing up funding costs for BNPL lenders, Evercore ISI analyst David Togus said as he downgraded Block (SQ) to Less Effective in September.

Mizuho analyst Dan Dolev downgraded the block (SQ) to Neutral in September, partly due to BNPL’s slower market penetration. In addition, bitcoin (BTC-USD) continues to boost sentiment around the stock even though it makes up less than 5% of the company’s total profits, he said.

In Q2, Block’s (SQ) The BNPL platform contributed $208 million in Q2 and $150 million in gross profit. PayPal (PYPL) said its Buy Now, Pay Later products processed $4.9 billion in Q2, up 226% year over year.

For a better look at BNPL, Affirm Holdings (AFRM) is set to reported Q1 financial results on November 8. The company expects a loss of $0.88 per share on revenue of $360.5 million. In August, it drives Q1 revenue of $345M-$365M and operating loss adjusted at 10%-12% of sales.

SA contributor JR Research said Block is under pressure to deliver Q3 earnings in the face of a deteriorating macro outlook, put management’s reputation to check.

Meanwhile, for PayPal (PYPL) Tech Stock Pros SA Contributor see a lot of wind going on.

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