PayPal Reports Earnings That Exceed Analysts’ Estimates

(Bloomberg) -- PayPal Holdings Inc. reported quarterly earnings that exceeded analysts’ estimates, sparking a surge in the stock.

Adjusted earnings per share in the third quarter was 61 cents, compared with analyst estimates of 52 cents. It was 58 cents in the same period last year. It gave a forecast for the fourth quarter of 81 cents to 83 cents, compared with estimates of 81 cents.

The San Jose, California-based company acknowledged that the upcoming loss of EBay Inc.’s business will have an impact on next year’s performance. It gave a preliminary forecast saying the transition would knock a percentage point off the company’s revenue growth rate. PayPal expects growth in 2020 to be about 17%, slightly below analysts’ expectations of 18%.

In 2018, EBay said it would shift payment processing to Adyen NV, ending a long relationship with PayPal dating back to when it was a subsidiary of EBay. The online shopping site’s share of PayPal’s business had been a declining, but the payments company will need to make up for the lost revenue elsewhere. Investments in Uber Technologies Inc. and Latin American e-commerce company MercadoLibre Inc. were meant to forge new partnerships that drive revenue, but they haven’t performed well financially. PayPal wrote down the value of those investments two weeks ago.

Shares of PayPal hit a record in July. Early this month, the company became the first to pull out of a Facebook Inc.-led cryptocurrency project, setting off a cascade of departures. The stock was up 15% for the year at the close of trading Wednesday. It rose as much as 10% after hours.

PayPal indicated that growth is slowing for Venmo as it seeks to turn a profit from the popular payments app. Venmo transactions were $27 billion in the third quarter, growing 64% from a year earlier. The rate was 78% in the same period last year. PayPal has been trying to increase revenue through a new Pay With Venmo feature in Uber and other apps. By the end of the third quarter, revenue from Venmo was almost $400 million on an annualized basis, Dan Schulman, the chief executive officer, said on a conference call to discuss the results.

Across all PayPal businesses, payment volume growth accelerated to 27% in the third quarter, reaching $179 billion. In the same period last year, volume increased 24%.

To contact the reporter on this story: Julie Verhage in New York at jverhage2@bloomberg.net

To contact the editors responsible for this story: Mark Milian at mmilian@bloomberg.net, Alistair Barr

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