PayPal Reports Q3 Earnings on October 28. Approach PYPL Stock Now with Caution.

Core Insights - PayPal's stock has declined 17.1% year-to-date, reflecting investor concerns over competition in the fintech sector and macroeconomic uncertainty [1][2] - Despite stock underperformance, PayPal has shown financial strength with double-digit earnings growth driven by improved transaction margins and core platform performance [2] Financial Performance - In the first half of 2025, PayPal reported steady growth in transaction margin dollars, with expectations for Q3 margins between $3.76 billion and $3.82 billion, indicating 3% to 5% growth year-over-year [5] - Excluding interest on customer balances, growth could be healthier at 6% to 7%, supported by the branded checkout business, Venmo usage, and PSP division performance [5] User Engagement - PayPal added nearly 2 million active accounts in the previous quarter, bringing the total to 438 million, with monthly active accounts rising 2% year-over-year to 226 million [6] - Transactions per active account (excluding PSP) grew by 4%, indicating strong user engagement and relevance in the digital payments space [6] Market Expectations - The options market anticipates a post-earnings move of about 7.3% for PayPal, slightly above its average swing of 6.98% over the past four quarters [4] - Historical trends suggest caution, as PYPL stock has declined after three of the past four quarterly reports, including an 8.7% drop following the second-quarter earnings release [3]