What to Expect from PayPal (PYPL) this Earnings Season?

PayPal Holdings, Inc.PYPL will report fourth-quarter 2016 earnings on Jan 26 after the bell. Over the last one year, the stock has outperformed the Zacks Internet - Software industry. It has gained 32.25% compared with the industry's gain of 17.86%.

The company has a Zacks Rank #2 (Buy) and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

PayPal Holdings, Inc. Price and EPS Surprise

PayPal Holdings, Inc. Price and EPS Surprise | PayPal Holdings, Inc. Quote

Per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) to beat estimates. Hence, it does not conclusively show that PayPal will beat estimates this quarter.

We don't recommend Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement.

However, PayPal's surprise history is impressive as the company has beaten estimates in three of the last four quarters and matched estimates on one occasion.

What Happened in the Last Reported Quarter

PayPal's third-quarter earnings surpassed the Zacks Consensus Estimate on revenues that also beat the same. The results were driven by continuous strong performance in global payments, both online and mobile. The company ended the quarter with 192 million active customer accounts.

PayPal's accelerated push into mobile with Venomo continuing to bolster its stake in mobile payments. The company's mobile payment volume was $26 billion, up 56% and representing 29% of total payment volume (TPV).

What We Are Watching

Partnership and mobile centrism continues to be PayPal's top priorities. The company's ongoing strategic partnerships with Visa and MasterCard offer great flexibility and choice to consumers. Partnerships with Facebook, Apple, and Alibaba are also delivering positive results.

The company has been exploring partnerships across multiple original equipment manufacturers (OEM), technology companies, retailers and financial institutions. It partnered with Latitude Financial Services to develop consumer financing products in Australia.

Summing Up

PayPal's two-sided platform, safety and simplicity of transactions, opportunities in the fast-growing mobile space, strategic partnerships and a strong balance sheet are positives. On the flip side, PayPal operates in a highly competitive global payments industry that is exposed to foreign exchange and interest rate risks on a continuous basis.

Stocks to Consider

You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

Seagate Technology plc STX , with an Earnings ESP of +1.87% and Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Corning Incorporated GLW , with an Earnings ESP of +2.27% and a Zacks Rank #2.

Microsoft Corporation MSFT , with an Earnings ESP of +1.28% and a Zacks Rank #2.

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Seagate Technology PLC (STX): Free Stock Analysis Report

Microsoft Corporation (MSFT): Free Stock Analysis Report

Corning Incorporated (GLW): Free Stock Analysis Report

PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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