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Earnings Roundup: Wayfair, Paypal beat estimates

Yahoo Finance’s Julie Hyman, Myles Udland, and Brian Sozzi break down the earnings reports for Wayfair and PayPal.

Video Transcript

MYLES UDLAND: Let's talk a bit more about a couple of stocks that have reported earnings over the last 18 hours or so, last night after the bell. We got PayPal out with their latest results. And then this morning before the bell, Wayfair reported their results. Julie Hyman, let's start with Wayfair, where this has been just a ridiculous pandemic winner, if you look at the stock chart over the last couple of months and then the stock up again on these results.

JULIE HYMAN: I mean, you could argue saved by the pandemic. Not just a pandemic winner, but if you remember, earlier this year the stock was doing very, very poorly. It plunged in the early part of the year. It had announced a 3% cut to its workforce and it went down. There were some short sellers who were talking about Wayfair. And then everybody started shopping for furniture, because they were all stuck at home. So this last quarter, sales were up 66%. The per share earnings, $2.30 versus the $0.80 estimate.

But I do want to note, the shorts have not disappeared. Short interest on Wayfair is still 22% of its flow. And so there's still not universally positive sentiment on this stock, can we say. And you could also surmise that some of the upside that we have seen in the shares this year were perhaps exacerbated by a short squeeze, people throwing in the towel on that short. So we'll see what continues down from here. But I mean, given the magnitude of that beat, Brian Sozzi, it's interesting that the shares are not up more than they are today.

BRIAN SOZZI: Yeah, a little bewildering, Julie. And keep in mind, so this quarter for Wayfair, a blowout quarter really, no other way to put it, comes after Etsy blew it out of the water a couple of weeks ago with its earnings. If you're trading the COVID play within the home furnishing space, now is the time you start looking at Williams-Sonoma, you look at Ethan Allen, even look at a La-Z-Boy as potential trades.

One stat worth noting here, Julie, number of active customers in Wayfair's direct business increased 50.9% year over year. 28.8 million customers. To me, Myles, that signals death for a lot of brick and mortar retailers this holiday season.

MYLES UDLAND: Yeah, I mean, I think again, you mentioned Wayfair disappointing maybe, but stock's at $25 bucks back in March. Now it's at $260, though as Julie noted, it's like $70 off the high. So a little something for everybody there as it comes to Wayfair. Let's talk quickly about PayPal, because Julie, this has really become an interesting crypto story. Stock under pressure after their results, but just a really interesting commentary from CEO Dan Schulman on the call last night.

JULIE HYMAN: Yeah, and PayPal, as you mentioned, the shares are under a little bit of pressure. They're down by 3%. Maybe something for everybody here too, because they're still up more than 70% year to date. And everybody's shopping online and doing electronic transactions, obviously, a lot of that is flowing through PayPal. The company processing $247 billion in transactions over the quarter, which is an increase of 38%.

Venmo payment process volume up 61%. And the company did raise its full year payment volume growth estimate. But it looks like what's weighing on the shares is the fourth quarter outlook. Even though the company's looking for profits to rise 17% to 18%, apparently that wasn't good enough for investors.

BRIAN SOZZI: Julie, the one thing I think a lot of investors are probably pretty happy about, for the first time, PayPal gave line of sight into when Venmo will be profitable. That year, potentially 2022. This has been a constant question PayPal has gotten over the past few years with Venmo. It has grown its top line significantly. We all use Venmo. It makes sense. But when will they deliver the profits, Julie? Looks like 2022.

MYLES UDLAND: Positive contribution to transaction margin dollars in 2021 is how they characterized the Venmo business there. $900 million I think in revenue is where the run rate has come to on that part of the company's business. Very interesting chunk there. One wonders if it's a public company on its own someday. We shall see.

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This commercialization includes a collaboration with Sanmina Corporation, a large contract manufacturer for the production of the RAP device, entering into a distribution and sales agreement with Aesthetic Solutions to distribute the RAP device during the initial U.S. launch and hiring a public relations and marketing firm.Adding to the good news, SOLY’s 510(k) filing for the cellulite indication was accepted by the FDA and is now under substantive review. To this end, Vendetti believes clearance will come by Q1 2021, although it could possibly come before the end of 2020, followed by a limited rollout to 20-25 KOLs in 2021 for both the tattoo and cellulite indications, assuming the latter is approved. “Following feedback from the KOLs, we expect a full commercial launch in 2022,” he noted.Given that SOLY is pre-revenue, Vendetti thinks the key areas to pay attention to are how the company will manage its cash burn, any updates on the 510(k) application for the RAP device’s cellulite indication and commercialization preparation for the limited launch of the RAP device.The strong growth potential of the RAP device in multiple markets prompted Vendetti to reiterate a Buy rating and $22 price target, suggesting 205% upside potential. (To watch Vendetti’s track record, click here)Are other analysts in agreement? They are. Only Buy ratings have been issued in the last three months. Therefore, the message is clear: SOLY is a Strong Buy. Based on the $16 average price target, shares could soar 123% in the next year. (See SOLY stock analysis on TipRanks)To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.