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PayPal (PYPL) to Report Q1 Earnings: What's in the Cards?

PayPal Holdings, Inc. PYPL is set to report first-quarter 2016 results on Apr 27. Last quarter, the payment company posted a positive surprise of 14.29%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

PayPal Holdings, Inc. is a technology platform company, which offers online payment solutions. These allow customers to pay and get paid, withdraw funds to their bank accounts and hold balances in their PayPal accounts in various currencies. Its payment platform includes PayPal, PayPal Credit, Venmo and Braintree products.

In the last reported fourth quarter, PayPal gave decent numbers with both revenues and earnings exceeding the Zacks Consensus Estimate driven by strong payment volumes and increasing customer accounts. The company’s active account base grew by 6.6 million in the fourth quarter, ending the year with 179 million active customer accounts.

PayPal is focusing on its core capabilities and is operating with greater flexibility for success in the digital payments space. Its foray into mobile payments with the Braintree acquisition and its One Touch system reflects the same. The company has also signed a few strategic agreements, including the one with First Data, to expand the acceptance of PayPal payments system among new clients and businesses. These efforts will continue to drive the company’s top line in the upcoming quarter.

However, intensifying competition in the payments -- especially mobile -- space can be a headwind for the company.

Earnings Whispers?

Our proven model does not conclusively show that PayPal will beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 29 cents. Hence, the difference is 0.00%.

Zacks Rank: PayPal carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. However, a 0.0% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Barracuda Networks, Inc. CUDA, with an Earnings ESP of +200.0% and a Zacks Rank #1 (Strong Buy). The company is slated to report fourth-quarter fiscal 2016 earnings results on Apr 26

Align Technology Inc. ALGN, with an Earnings ESP of +12.82% and a Zacks Rank #1. The company is set to report first-quarter 2016 earnings results on Apr 28

Canadian Pacific Railway Limited CP, with an Earnings ESP of +0.48% and a Zacks Rank #1. The company’s second-quarter fiscal 2016 earnings release date is Apr 27

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
CDN PAC RLWY (CP): Free Stock Analysis Report
 
ALIGN TECH INC (ALGN): Free Stock Analysis Report
 
PAYPAL HOLDINGS (PYPL): Free Stock Analysis Report
 
BARRACUDA NTWRK (CUDA): Free Stock Analysis Report
 
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