Why PayPal disappoints
Travel well, PayPal disappoints, the headlines on Cannabis run with the possible decriminalization in the USA. Equity analysis by Peter Garnry, Head of Equity Strategy for BG SAXO
Covid does not scare the travel sector, quarterly ok for Expedia and Airbnb
Expedia and Airbnb both posted strong gains last week with the former showing great strides in the third quarter posting EPS at $ 3.53 versus the expected $ 1.63 on stronger-than-expected revenue. Airbnb also accelerated thanks to an EBITDA of $ 1.1bn versus the preliminary estimate of 817 million, and with a turnover of 10% higher than the estimates at 2.24 billion dollars, despite a lower than estimated gross bookings value. Overall, Airbnb's Q3 result was much better than initially anticipated given the rise in Covid-19 cases around the world.
Our travel equity basket is the fifth best performing this month, up 6.5%. Despite this, the travel industry still blames the pandemic period and it will be the sector that takes the longest to fully recover.
The swing of sentiment on PayPal
Investors were initially focused on PayPal's Q3 result which showed higher than expected EPS but slightly lower than expected revenue. Then Venmo's partnership with Amazon that allows customers to pay on Amazon directly from the Venmo app kicked off a positive sentiment. Later, however, investors realized the negative outlook for next quarter revenue now estimated at $ 6.85-6.95 versus an initial forecast of $ 7.24 billion, slightly higher than 13% yoy in Q3, but substantially lower. below the long-term growth rate previously indicated by the company, which is 20%. The operating margin does not improve even falling for the second consecutive quarter. Shares of PayPal fell 5% in extended trading, extending this year's drawdown to 31%. Our basket of digital payments stocks is the worst basket this month.
Cannabis finds an ally in the Republicans
That's what the cannabis industry has been waiting for: the possibility of House Republicans presenting a reform bill that removes cannabis from the controlled substances act. This means that the spread of cannabis would no longer be considered a federal-level crime with similar regulation to alcohol today. While still a rumor and an initial draft, this news was enough to stimulate investors, so much so that our basket of cannabis stocks grew 10.2% this month.
This is the good news, the bad news comes from one of the largest companies in the industry, Canopy Growth which reported very disappointing earnings, with third quarter revenue of $ 131 million, down 3% y / y, and a gross margin plummeted to -54.2% from 20% in the second quarter. This is due to a devaluation of inventories, as consumer preferences have changed during the last quarter, moving towards high-end products. A negative outlook for investors and for the sector industry in general which is still struggling to increase profitability.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/perche-paypal-delude/ on Thu, 11 Nov 2021 11:20:49 +0000.