PayPal's Results Put Charge in Share Price--Update
October 24 2019 - 5:19PM
Dow Jones News
By Peter Rudegeair
Shares in PayPal Holdings Inc. rose nearly 9% on Thursday, their
biggest one-day gain in over a year, 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.
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 17:04 ET (21:04 GMT)
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