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PayPal (PYPL) is scheduled to report results of its second fiscal quarter before the market opens on July 30, with a conference call scheduled for 8:30 am EDT. What to watch for:

Q2 PRESENTS OPPORTUNITY: In a research note ahead of earnings, Wells Fargo said that with PayPal's shares underperforming year-to-date, Q2 setup looks to be an opportunity to instill investor confidence in management and the turnaround story to drive a stock rebound. While investor interpretation of FY24 guide being conservative and excitement around new product potential drove shares higher into the Q1 print, shares have slowly bled since Q1 results, driving a 20% underperformance year-to-date, the firm says. With no tangible headlines to explain the selloff, Wells attributes the downward move to waning excitement of new products as investors realize benefits are likely years away. The firm has an Equal Weight rating on the shares with a price target of $65.

LACK OF PAYMENT VOLUME GROWTH: Earlier this month, William Blair downgraded PayPal to Market Perform from Outperform without a price target. The firm sees potential upside to 2024 and 2025 earnings estimates, saying PayPal continues reducing non-transaction expenses and buys back stock with its "robust" free cash flow. However, it does not anticipate the stock's multiple will appreciably rise in the absence of accelerating payment volume growth or expanding transaction dollar margin. Blair is "increasingly convinced" that PayPal will have to reverse the decline in what is effectively its gross margin, and most important unit economic key performance indicator, for the stock to re-rate higher. It does not see this as a high probability outcome in 2024 or 2025. In addition, Apple's (AAPL) ongoing consumer-facing fintech investments, primarily Apple Pay, "create intractable competitive challenges" for PayPal, adds the firm.

POSITIVE ON RECENT SELLOFF: Back on July 2, Susquehanna upgraded PayPal to Positive from Neutral with an unchanged price target of $71. The firm cited valuation for the upgrade following the stock's significant recent decline. PayPal's consumer-facing improvements should increase its value proposition for branded checkout, Susquehanna told investors in a research note. The firm notes the company is making "profitable growth" a top priority.

LAST QUARTER: Back in April, PayPal reported Q1 adjusted EPS of $1.08, with consensus at $1.14, and Q1 revenue of $7.7B, which was better than the expected $7.02B. The company also said that Q1 total payment volume was up 14% to $403.9B. For the second quarter, PayPal said it saw adjusted EPS up by low double-digit percentage, and net revenue up approximately 6.5% and 7% FXN.

Additionally, the company said it expected full-year 2024 adjusted EPS up by mid to high-single-digit percentage vs. $3.83 last year. Estimated non-GAAP amounts for the twelve months ending December 31, 2024, reflect adjustments of approximately $499M, including restructuring charges of $175M in Q1 2024 and additional estimated restructuring charges of approximately $70M to $90M in Q2 2024, PayPal added.

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