Historical Stock Chart
6 Months : From Oct 2019 to Apr 2020
By Peter Rudegeair
Shares in PayPal Holdings Inc. rose as much as 10.7% Thursday morning, on pace for their biggest one-day gain ever, after the financial-tech company reported a jump in its user base and progress in making money from its Venmo service.
The San Jose, Calif.-based company reported third-quarter earnings late Wednesday that exceeded analysts' expectations. PayPal's profit increased 6% to $462 million, while revenue was up 19% to $4.38 billion. The number of active PayPal accounts rose to just under 300 million.
Investors had been on edge about PayPal's trajectory following the departure of some top executives and delays to new products and prices that forced the company to scale back its outlook. EBay Inc., PayPal's former parent company and one of its biggest sources of volume, is due to switch payment processing from PayPal to Adyen NV next year. Between PayPal's second-quarter earnings report and its latest release, the shares fell about 20%
That caution dissipated following its latest results. "So what's the bear case again?" asked analysts at Morgan Stanley in a research note on Thursday.
In midday trading, PayPal's stock was up 7.4% at $103.76, paring its early gains.
Venmo, the digital money-transfer service popular with millennials, processed $27.5 billion in payments in the third quarter and was on track to generate annual revenue of about $400 million. Finance chief John Rainey said on a conference call with analysts that Venmo has changed from being a drag on profit margins to contributor. A Venmo credit card due to hit the market next year should help accelerate that trend.
EBay is set to account for about 6% of PayPal's overall payment volume at the time the companies' current agreement ends in July 2020. That compares with 11% as the third quarter of 2018.
"This is going to be a very manageable transition," PayPal Chief Executive Dan Schulman told analysts on the conference call.
The company also gave shareholders a reason to believe better days are ahead. PayPal told investors to expect its payments volume to expand more than 20% in 2020 and hinted that it was on the hunt for more deals. Last month, PayPal received approval to take a majority stake in Chinese payments processor Guofubao Information Technology Co., Ltd., which it said made it the first foreign company to get the green light to take online payments in China.
PayPal also mixed in some less rosy news in its earnings report. It lowered its 2019 revenue and profit outlook. The volume of loans PayPal made to merchants and consumers and kept on its balance sheet swelled 60% to around $3.5 billion, which could be a risk if the economy turns and defaults rise.
Write to Peter Rudegeair at Peter.Rudegeair@wsj.com
(END) Dow Jones Newswires
October 24, 2019 13:03 ET (17:03 GMT)
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