PayPal (PYPL, Financial) has updated its FY24 earnings forecast, projecting a mid to high single-digit percentage increase in adjusted EPS growth year-over-year. This adjustment comes after a stronger-than-expected start to the fiscal year. Despite missing Q1 adjusted EPS expectations, PayPal reported a 27% increase compared to the previous year, based on a new non-GAAP calculation that excludes stock-based compensation and related taxes. The company also saw a healthy rise in total payment volume (TPV) and a significant increase in payment transactions, with active accounts growing sequentially for the first time since Q4 2022.
In Q1, PayPal achieved an adjusted EPS of $1.08, with revenue growth accelerating slightly to 9.4% year-over-year, reaching $7.7 billion. TPV grew by 14% year-over-year, maintaining the growth pace seen in the previous quarter. Active accounts decreased by 1% year-over-year to 427 million but improved slightly from 426 million in Q4, breaking a trend of quarter-over-quarter declines.
Key strategic initiatives have shown promising results. Fastlane by PayPal, which simplifies the checkout process by removing the need for passwords, achieved an 80% conversion rate among returning users. Although currently available to a limited number of merchants, PayPal plans to expand this service across the U.S. in the second half of 2024. PayPal Complete Payments (PPCP), facilitating multi-party transactions, is gaining traction, particularly among small and medium-sized businesses, contributing to approximately 7% of PayPal's volume. This service has recently launched in Canada, the U.K., and 20 other European countries, with additional features rolling out in markets like Germany and the U.S.
Venmo, another focus for PayPal, saw a 21% increase in user activity for its debit cards in Q1. Plans are underway to integrate these cards with Apple and Google Pay, enhancing in-person payment options in the upcoming months.
Despite these positive developments, PayPal's CEO James Chriss acknowledged during the Q1 earnings call that the company's turnaround plan is still a work in progress. With the digital payment space increasingly competitive, dominated by major tech players like Google (GOOG, Financial) and Apple (AAPL, Financial), PayPal is focused on a strategic transformation that will take time to fully realize.
