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0:00 Hey everyone and welcome back to another video for today. So PayPal, PayPal did it again. Beat across the board, actually a triple beat, beat for a quarter and even revised guidance on the upside. And yet the stock is down as you can see at the time of making this video around 7% or so. Stock went down first 4% before before the earnings call actually started. Then it went flat, was actually a little bit green, then went down 5%, 6 7 opened the market down 8%. So what exactly happened? Right, we went live. Uh Roy and myself, we were live for 2 hours or so and we couldn't really find any very good reason for the stock to be down. So let's review everything you need to know about PayPal. I like
0:46 it. I'm still bullish on the company. I still think it's very undervalued. Like I said, beat across the board. Okay, double beat for the quarter and guidance is revised on the upside. So, yeah, we're getting here the SoFi treatment. Remember when SoFi had triple beats, stock went down. Well, now you're getting here the same with PayPal/PayPal. SoFi is actually up 16 17% or so. That's going to be for another video, but in this video, let's focus on PayPal specifically. Special thanks to fiscal.ai AI for sponsoring this video as well. All of the transcript, everything is already on this website. You can listen to it. You can have the AI overview tell you everything you need to know. Ask it specific questions.
1:32 We're going to go over all of that in this video. Key performance indicators as well. So, thank you. Fiscal.ai link is down in the description. You'll get and in the pin comment, you'll get 15% off. New users will get Fiscal Pro for free for the next two weeks. And if you want to support me even further, do check out the link down in the description. Enter the pin comment with the top 10 best stocks to buy now or go to full.com/cotchinvestor. Thank you very much. All right, so remember I wrote down a couple of catalyst couple of weeks ago for PayPal. Brainree growth, check. Venmo monetization and growth, check. Ads, unfortunately, we only heard about ads once in the earnings call and that's about it. So that's still pending. Omni channel momentum check. margin dollar transaction margin dollar trend continues on the way up check as well.
2:19 So I'm quite happy. Okay, first slide which is again very very good and shows that PayPal is improving. So they've seen here mid 10% global brand checkout traffic on new checkout experience over 45% pay with Venmo TPV growth and over 20% buy now pay later TPV growth. Incredible performance here. PayPal and Venmo can now be set as default payment options in the Taco Bell app and website and customers check out with PayPal can earn 20% cash back. Terms and conditions apply, of course. Then Venmo specifically, Alex at the end of the call was a bit disappointed that nobody really asked him about Venmo, but luckily he will be speaking Thursday, I
3:05 believe 11:00 a.m. Eastern on X live stream. He will be talking about PayPal's AI moves, SMBs, and all of that. So stay tuned to hear more about that on Thursday. But with regards to Venmo, so of course over 45% pay with Venmo TPV growth, over 40% Venmo debit card monthly active account growth and over 20% Venmo revenue growth. So growth across the board for Venmo monetization there. Of course, it has been undermonetized for many, many years. This is something that Alex has been saying since he came in and you're seeing that well the Venmo team has been killing it. They talk here a little bit more about the Big 12 uh co-branded partnership that they've well we've talked about this a couple of weeks ago.
3:52 Then moving on to Scale Omni and Grow Venmo. So they see here that they've added 2 million 2 million firsttime PayPal and Venmo debit card users in the United States in Q2. Over three million contactless mobile wallet enrollments in Germany since the launch and over 50% enrolled NFC users set PayPal as their default NFC wallet. So again, we have here a solid momentum for the whole PayPal business. But as I've said and as they've been saying it time and time again, this is a big big ship to turn around, right? This is not look at this total payment volume, right? This is not hundreds of millions of dollars. No, you're reaching here half trillions of dollars per quarter. So trillions of
4:37 dollars per year and to make huge changes and to see those impacts, it usually takes a little bit of time. But despite all of that, TPV and revenue accelerated quarter over quarter. So that's great. Another quarter of high singledigit transaction margin dollar growth, right? 7% year-over-year. transaction margin dollars X interest on customer balances was up 8% year-over-year non-GAAP EPS up 18% and the only issue I'd say or big question mark was free cash flow free cash flow for the quarter was quite low in this case adjusted free cash flow $656 million they say here that's been impacted by shifts in working capital and then they wrote here at the bottom of the slide adjusted free cash flow
5:23 excludes the net impact from timing differences between originating European buy now pay later receivables classified as held for sale and their subsequent sale. Now there they haven't really touched more on that during the call but the most important part is that the free cash flow for the full year remains the same and so yeah quarter over quarter there might be some lumpiness and all of that but as long as the yearly free cash flow stays the same or at least does not decrease I think I think that should be fine. So yes, do expect huge increases in Q3 and Q4 free cash flow wise. Now if we look at TPV mix across PayPal's platform, you can see here again Venmo TPV growth accelerated to the highest
6:09 rate over the past 3 years. We've even seen we've even seen some PSP TPV stabilizing. So brain trees actually returning to growth, which is something that we're going to see more and more in Q3, Q4, and also Q1, Q2 of next year as we lap those easier quarters, right? The year-over-year comparisons are becoming easier for PayPal. So I do expect it to become well much better. Well, some tailwinds over the next couple of quarters. Looking at the case for oh, who uses PayPal anymore? Well, again, record quarter active accounts 438 million up 2.1% year-over-year. Yes, of course, easy easy comps here. But again, this shows you that more people use
6:56 PayPal today than ever before. As for the overall revenue, transaction revenue, of course, the majority here, over revenue did increase 5.1%, so a nice acceleration on growth here. And the blue bar right here, right, OAS, that is also increasing. I think it was 16% or so. Last quarter was 17%. But that's going to be that's going to be a billion dollar business probably a year from now each and every quarter. Something you should not be sleeping on, right? Because every billion here and there that could be added to the business, right? For example, advertising. Again, unfortunately, we do not get to hear a lot about advertising during this earnings call. But advertising, advertising is going to be quite a big business for PayPal, right? If you can add suddenly a billion
7:41 dollars that didn't exist before, it's quite something, right? And it's probably going to be more than just a billion dollars. Billion dollars, high margin, high margin dollars as well. People are just sleeping on that. Moving on to number of payment transactions, that was down 5.4% year-over-year, but up quarter over quarter. Looking at transaction margin, increased 6.5% year-over-year. Also up here quarter over quarter. transaction take rates did stabilize quarter over quarter was still down year-over-year but it stabilized quarter over quarter to 1.7% there was that question during the earnings call very very good question at the start of the earnings call when talking about pay with crypto PayPal world and all of that yes is that going to increase your total addressable
8:28 market and how is that going to affect your take rate your margins unfortunately we not really get a clear answer we got the answer on the total addressable market makes sense. Yes, it is going to increase the total addressable market because you're now well available in markets you weren't available before. Okay, so that's great. But what does that mean for your take rate? What does that mean for margins? Naturally, you would think, okay, you're sacrificing here take rate margin for volume growth, which I'd say, okay, you know what? Why not? Fine. But I'd like to get maybe a clearer answer. On the other side, they have some levers to pull, right? They have some levers to pull to mitigate that impact, right? You can have advertising because suddenly
9:14 you have way more volume coming in, way more exposure. Your market is becoming bigger and bigger. So, your advertising market can become bigger and bigger. Should balance things out. Second of all, pay with crypto stable coins, right? PayPal world, all of that running or getting used by PayPal's own stable coins means that margin wise you can play around with that. That could be something good. You can make money on your stable coin as well. So there are definitely some levers for PayPal to pull here. So the total addressable market goes up which means more volume coming in which should be good for revenue. But how will that translate to the bottom line remains to be seen remains to be seen. Now as for Q3 as you can see here they're raising fiscal year 25 transaction margin dollars and EPS
10:02 guidance for Q3. It's about well basically remaining the same but for the full year we are going higher. We are going higher and that's great. Transaction margin dollar 5 to 6% growth compared to 4 to 5% and then non-GAAP earnings per share now expecting 11 to 14% growth previously 6 to 10%. With regards to GAP we're also going up a little bit 10 cents on the lower end and then another 10 cent on the high end. free cash flow still expected to be six to7 billion dollars and share purchases around $6 billion. I think we can all agree that as long as the stock remains very very cheap, they should just accelerate that uh buyback. But okay, I guess there is a plan to follow and so
10:47 they're buying back I think it was $ 1.5 billion worth of shares in the quarter. 22 million shares less already available on the market. So I think that's that's going to be a good thing, right? If if they continue to do that, I think by the early 2030s, this is a private company. So something will have to give. And so before concluding, if we go and look at the transcript or what was mentioned during earning score, what was management most excited about? You can ask this question here on fiscal.ai and it will go through all of the transcript and then tell us what management was most excited about here. So PayPal world was one of the one of the things that were mentioned. Of course, this is something that was new, which was quite interesting that they get to announce these types of things right before the earnings report. So,
11:33 PayPal World, a new initiative connecting major digital wallets was highlighted as a gamecher for branded experiences. The excitement stemmed from its potential to expand PayPal's reach beyond its 400 million customers to over two billion customers worldwide. Management believes this platform will simplify global transactions for both consumers and merchants, fostering a more seamless and accessible commerce ecosystem. The interoperability between PayPal and Venmo was also key point of enthusiasm. To me, this never made any sense why why these two systems aren't talking with each other, why they are actually competing with each other. Previous management just never made sense uh never made sense to me. So, this is basically what they're excited about. Strong performance of branded
12:20 experience which includes winning checkout by operator Venmo and omni channel capabilities was another significant source of excitement. I I do agree that when the CFO was talking uh it was quite uh sleepy to be honest quite quite sleepy let's see when management is expecting growth to accelerate for the business although we have seen growth accelerating already uh this quarter so PayPal's growth is expected to accelerate in line with their three-year outlook as stated by the co the confidence stems from the traction they are seeing across various strategic initiatives specifically the CFO stated that they expect to accelerate as they move through the next couple of quarters and next couple of years whether it's
13:06 because of branded checkout upgrades, Venmo momentum, PSP inflection point, PayPal world, debit card adoption and European uh rollout. So again, to turn a ship like PayPal around, it takes time. Yes, I do admit it may be taking a little bit more time than expected. But to me, if PayPal, for example, over the next couple of years, over the next couple of years, I do actually expect, this is a prediction that I've been making for a while now. I do expect PayPal to go back to $300, to reach their all-time highs probably by 2030. Remember, it's going to be quite easier for them to reach $300 with fewer shares available in the public market, plus with more revenue, with more profits, with more free cash flows. I don't see why by 2030 we will not be at all-time
13:54 highs. Yes, in the meantime you might say, "Oh, opportunity cost, etc., etc." But if you can tell me that I can 4x my money in around 5 years, maybe even more because my position is a bit lower than $72 here, I take it. Any day of the week, I would take it. Especially if I say that the downside is quite limited. So, yes, to me, PayPal is one of those no-brainers. I know we've been talking a lot about Google as a no-brainer, but I think PayPal as a no-brainer makes a lot of sense here as well. And so, all in all, that's about it for me in this video. You might not like the stock's reaction. That's completely fine. I don't like it either. I'm scratching my head. Maybe we will see a rebound throughout the day or maybe in the next couple of days as the market figures out
14:40 that h actually this was a pretty good quarter. So, we'll see. But in the meantime, it's still PayPal. That's about it for me in this video. I'll see you all in the SoFi one. Have a good one. Bye-bye. [Music]
