PayPal Slumps as Loss of EBay Bites Harder Than Expected

(Bloomberg) -- PayPal Holdings Inc. slumped in New York trading after warning EBay Inc. is moving payments off its platform faster than the technology giant originally anticipated.

That’s hindering revenue, which climbed just 17% to $6.24 billion, missing the $6.27 billion average of analysts’ estimates and below the forecast the company set just three months ago. PayPal said it expects revenue in the third quarter of as much as $6.25 billion, below the $6.45 billion analyst estimate.

PayPal has been battling the loss of EBay, it’s former parent company, ever since the two decided to end their longtime partnership in 2018.

“We’ve always known that EBay is going to move their managed payments away from PayPal, it’s a matter of timing,” Chief Executive Officer Dan Schulman said Wednesday in an interview. “That’s happening faster than we anticipated.”

Shares of the company dropped 6% to $283.87 in New York trading at 9:39 a.m., the biggest intraday decline since March 5. The stock has gained 21% this year, outpacing the 18% advance of the S&P 500 Information Technology Index. 

Read a snapshot of PayPal’s earnings

Despite EBay’s move away from PayPal, the payments giant said on Wednesday it still expects revenue for the year to climb roughly 18.5% when adjusting for fluctuations in currencies. It also reaffirmed guidance that it would add as many as 55 million active users this year. 

The company’s total payments volume soared 40% to $311 billion in the second quarter, topping analysts’ estimates and exceeding $300 billion for the first time ever in a three-month period. Volume is now expected to rise as much as 35% this year, up from the roughly 30% PayPal previously expected. 

The second quarter “was another remarkably strong quarter for PayPal, despite lapping strong performance at the beginning of the pandemic, although results were muddied by a faster-than-expected eBay roll off,” Lisa Ellis, an analyst at MoffettNathanson, said in a note to clients. 

Super App

PayPal is in the midst of overhauling its app as it seeks to become the world’s next super app -- where consumers can conduct their finances, pay bills and shop all in one place. The firm has completed code for the app, Schulman said on Wednesday, adding that the initial version will include high-yield savings features, bill-pay functionality and the ability for users to message each other.

The firm -- known for its buy button on e-commerce sites around the world -- has expanded its offerings in recent years. It now gives customers the ability to buy, sell and hold cryptocurrencies and allows users to split their payments into four installments.

What Bloomberg Intelligence Says:

“We’re still confident guidance can be achieved based on the strength of Venmo, which can exceed $900 million in 2021 revenue, solid momentum in buy now, pay later and in-store QR code payments, better seasonality and growth with new marketplaces.”
--Julie Chariell, BI fintech industry analyst

Click here to read the research. 

PayPal is planning to hire more for its crypto efforts in the coming months, Schulman said.

“We are trying to pick off the very best talent in the ecosystem to come work here at PayPal,” Schulman said. “We have a list of names and phone numbers and we are slowly but surely building a team that I think is going to really shape the thought process around this.”

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