PayPal Stock Is Popping as Earnings and Payment Volume Beat Estimates
PayPal Holdings stock was up more than 8% in after-hours trading Wednesday following its third-quarter earnings report. The digital-payments company had faster-than-expected growth in payments volume in the period and reported higher earnings than analysts had been expecting. Its Venmo unit also grew rapidly.
PayPal stock (ticker: PYPL) was up 15% this year through Wednesday's close, behind the S&P 500's 21.5% return including dividends. Other payments companies Visa (V), Mastercard (MA), and Square (SQ) had returned 30%, 39%, and 4% in 2019, respectively.
PayPal has dropped almost 22% since it last reported earnings in late July. It cut its full-year revenue forecast then because of delays in product integration, pricing changes, and currency movements, but maintained its full-year earnings guidance.
For the third quarter, PayPal said on Wednesday that it earned an adjusted $723 million, or 61 cents a share. That is up 5% from 58 cents a share in the same period in 2018, and is well ahead of analysts' consensus expectation of 52 cents in adjusted earnings per share. PayPal's guidance issued last quarter, however, was for between 69 cents and 71 cents in adjusted EPS. Revenue came in at $4.4 billion, even with estimates and up 19% from last year's $3.7 billion.
Unrealized losses on investments in MercadoLibre (MELI) and Uber Technologies (UBER) represented a 15 cent-drag on PayPal's earnings per share in the quarter. Excluding that impact, adjusted EPS would have come in at 76 cents.
PayPal's total payment volume, a closely watched metric, reached $179 billion in the third quarter, up 25% from a year ago.
Analysts had been expecting $177.4 billion in total payment volume. PayPal said that it ended the third quarter with 295 million active accounts, up 16% from last year.
The company said that Venmo's total payment volume reached $27 billion in the third quarter, up 64% year over year. It did not disclose any details about losses at Venmo.
PayPal also said that it repurchased $350 million of its stock in the third quarter, and raised $5 billion in debt in the form of bonds, using half to repay a term loan.
In the fourth quarter, PayPal management expects revenue of $4.89 billion to $4.95 billion, up 17% from a year earlier, and adjusted earnings per share of 81 cents to 83 cents.
Wall Street analysts are bullish on the stock: 79% have a Buy or equivalent rating, while 19% recommend a Hold. One analyst rates PayPal a Sell. Their average price target is $127.05, almost 34% above recent levels.
Write to Nicholas Jasinski at [email protected]
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