PayPal Inks Deal for Amazon.com Customers to Pay With Venmo
(Bloomberg) -- PayPal Holdings Inc. shares surged as much as 6.5% after it inked a deal with Amazon.com Inc., even as the payments giant trimmed its full-year forecast for revenue and profit.
PayPal reached an agreement with Amazon.com to allow the firm’s Venmo wallets in the U.S. to be accepted on the e-commerce giant’s website and mobile app starting next year, according to a statement Monday announcing third-quarter earnings.
The deal temporarily outshined results in the third quarter, when PayPal saw its former parent company EBay Inc. accelerate a shift away from the payments company. Volume tied to EBay’s marketplace declined 45% in the third quarter, a bigger drop than in the prior period.
That weighed on overall payments volume, which climbed just 26% to $310 billion, a smaller increase than analysts anticipated. Volume on Venmo jumped 36% to $60 billion in the third quarter, which also missed expectations.
“We’ve reached an agreement with Amazon in which they will accept Pay with Venmo on Amazon.com and their mobile app for checkout, which is obviously an incredibly meaningful part of Venmo’s monetization journey,” PayPal Chief Executive Officer Dan Schulman said in an interview. “It’s a result of us no longer having the restrictions of the EBay operating agreement. That enabled us to reach this agreement with Amazon.”
Venmo is on track to deliver the $900 million in revenue PayPal has previously promised, Schulman said. The firm also believes Venmo’s transaction margin -- a measure of the wallet’s profitability -- will be positive this year, he said.
“Venmo is moving from strength to strength,” Schulman said. “Pay with Venmo is probably going to be the biggest revenue source going forward.”
PayPal now expects revenue to climb just 18% to $25.3 billion to $25.4 billion for the year; the company had previously forecast a 20% jump. Total payments volume is now forecast to increase by as much as 34% while adjusted earnings per share is expected to rise 19% to $4.60.
PayPal shares bounced around after the announcements. Initially up in extended trading, the stock dipped after the statement -- then rose as much as 6.5% before retreating again. It was little changed at $229.26 as of 5:02 p.m. in New York. The stock had gained about 2% this year as of the close of regular trading.
PayPal stood by its previous forecast for adding net new users to its many platforms, noting that figure should climb by approximately 55 million for the year.
The company has previously said it hopes to become the next global super app, or a digital ecosystem that blends social media, commerce and banking. In the third quarter, PayPal added a high-yield savings account and shopping features as part of its push to get users to spend more time in its app.
PayPal announced during the period that it isn’t pursuing an acquisition of Pinterest Inc., ending days of speculation over a potential $45 billion deal between the two companies. With Pinterest’s visual-search and scrapbooking platform, PayPal could have gained more data about the products consumers are buying.
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