PayPal (PYPL) Earnings Ahead, But All Eyes on M&A Outlook

While the busiest stretch of earnings season is behind us, there are still plenty of high-profile names left to report. Included in the bunch are fintech firm PayPal Holdings (PYPL, $224.74), cryptocurrency exchange Coinbase Global (COIN, $339.56) and media and entertainment giant Walt Disney (DIS, $175.96) – each of which will unveil their quarterly results this week.

So far, S&P 500 companies have turned in solid results for the third quarter, with more firms not only beating earnings per share (EPS) estimates but exceeding these estimates by a wider margin than the average, says John Butters, senior earnings analyst at FactSet Research Systems.

"The index is now reporting the third highest (year-over-year) growth in earnings since the second quarter 2010," he adds.

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PayPal Earnings Report: Will We Get Acquisition Strategy Updates, Too?

Can an earnings beat help PayPal stock reverse its second-half slump? Investors certainly hope so. Shares are down more than 27% from their late-July record high above $310.

Why the poor price action in the fintech stock? In part due to reports that surfaced late last month suggesting the payments processor was considering buying social media firms Pinterest (PINS). PYPL later said it was not looking to buy PINS "at this time," but the stock has failed to recover.

Piper Sandler analysts Christopher Donat and Crispin Love (Outperform) see the announcement as a "clear positive," though they feel PayPal's statement left open the possibility that it "might pursue a potential acquisition of PINS in the future." They'll be looking for more clarity on the company's acquisition strategy in its third-quarter report, which will be released after Monday's close according to this week's earnings calendar.

When it comes to the company's quarterly figures, Jefferies analysts (Buy) are expecting "muted Q3 results." Specifically, they point to a deceleration in web traffic to a select basket of PayPal merchants from 2019 levels. They are looking for PYPL to report adjusted earnings of $1.09 per share on $6.2 billion in revenue.

As far as consensus estimates for PayPal's third-quarter report: the pros are looking for earnings of $1.07 per share – flat on a year-over-year (YoY) basis – and revenue of $6.2 billion, a 14.8% improvement from Q3 2020.

Coinbase Global Stock Sizzles Ahead of Earnings

Coinbase Global stock sold off sharply in the wake of its mid-April initial public offering (IPO), but shares have recovered strongly in recent weeks. COIN is now up nearly 51% since skimming the $225 per-share mark in late September – rising alongside Bitcoin, which has surged roughly 48% over that same time frame.

COIN's price action has been sparked by several catalysts, including "the arrival of bitcoin-based futures exchange-traded funds (ETFs) and its plan to enter the non-fungible token (NFT) marketplace," says CFRA Research analyst David Holt (Buy). "Longer term, we think recent developments help anchor a greater degree of credibility around digital assets and augment the growing appetite across both retail and institutional investors."

Piper Sandler analysts Richard Repetto and Patrick Moley (Overweight) are also bullish on these catalysts and believe "COIN has the scale to become a dominant player in the NFT space and diversify revenues in the process."

This is especially significant given that, in their view, "NFTs are in the very early stages of the adoption curve and are likely to see significant growth in the coming years."

Repetto and Moley "believe COIN's 3Q21 volumes should be better than expected as consensus estimates have risen 6% over the past 45 days." They are anticipating above-consensus earnings per share of $2.08 and revenue of $1.65 billion when Coinbase reports third-quarter earnings after the Nov. 9 close.

For the sake of comparison, analysts, on average, are anticipating EPS of $1.56 on $1.57 billion in revenues.

Walt Disney Projected to Swing to a Profit in Fiscal 4Q

Walt Disney stock has been the definition of "chop" for the greater part of 2021. To wit, shares have been stuck between the $170 and $185 price points since May and are down 3.4% for the year-to-date.

Still, most analysts are upbeat toward the shares. Of the 29 analysts following DIS that are tracked by S&P Global Market Intelligence, 18 say it's a Strong Buy, five call it a Buy, six deem it a Hold and not one believes it's a Sell or Strong Sell. Plus, the average price target of $208.26 implies expected upside of more than 18% in the next 12 months or so.

Needham analyst Laura Martin is one of those in the Hold camp on Disney due to concerns over the company's upcoming earnings report.

"Historically, when DIS misses its Disney+ subscriber adds, its stock often falls," she says.

"We believe direct-to-consumer subscriber adds for the quarter are likely to disappoint owing to Hotstar India softness and disconnects and the new Cricket season doesn't start until the second quarter of next year," Martin adds. However, she does believe momentum for U.S. subscribers will remain intact and sees a more subdued impact on theme park attendance from the Delta variant of COVID-19.

The entertainment issue will report fiscal fourth-quarter earnings after Wednesday's close. The pros, on average, are looking for $16.22 billion in revenues (+10.3% YoY) and earnings of 44 cents per share – compared to a per-share loss of 39 cents in the year-ago period.